I have been asked this question: "Folt Industries in 2017: It sold 1000 in sweaters, it imported 200 in wool from abroad, and purchased 200 in wool from domestic suppliers, it purchased a sewing machine for 300 that deprecated by 25 in that year. It paid 600 in wages. What was Folt Industries value added in 2017?"

Now, I am thinking that to calculate this I just take the value of sales (1000), and subtract the money they spent on intermediate goods (200 + 250), so would their value added be 550 total? Or am I missing something.


$$\text {Value Added = Profits + Depreciation/Amortization + Wages}$$

So you cannot calculate it because you cannot calculate profits (if losses then they enter negatively), because the exercise you were given informs about purchases of materials, not how much value of materials was consumed in production. Fluctuations in Inventories matter.

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