How is the GDP calculated by the output approach? What are the different stages?

Question: Explain the output approach to calculating GDP and describe its key stages. Answer: The output approach calculates GDP by summing the value added by each productive sector of the economy. The value added is the difference between the total value of goods and services produced (called output) and the cost of intermediate inputs (such as raw materials, energy, and services) used in the production process. The key stages of the output approach are categorized under Gross Value Added (GVA) at basic prices, taxes and subsidies related to production, and GDP at market prices. The key stages involved in the output approach to GDP calculation are: 1. Calculate the Gross Value Added (GVA) at Basic Prices for Each Sector: For each productive sector (e.g., agriculture, manufacturing, construction, services), compute the GVA at basic prices as the difference between the output and intermediate inputs for that sector. 2. Calculate the Total GVA at Basic Prices: Sum the GVA at basic prices for each sector to obtain the total GVA at basic prices for the entire economy. 3. Calculate Taxes on Production: Determine the taxes on production, which include taxes on products and factors of production (e.g., labor or capital), such as payroll and property taxes. 4. Calculate Subsidies on Production: Determine the subsidies on production, which consist of financial assistance provided by the government to the productive sectors, including subsidies on products and factors of production. 5. Calculate GDP at Market Prices: Add the total GVA at basic prices, taxes on production, and subtract subsidies on production to calculate GDP at market prices.