The correct option is 2 and 3 only.
Explanation
Gross Value Added (GVA) is a measure of the value of goods and services produced in an area, industry, or sector of an economy. It is calculated as the value of output minus the value of intermediate consumption. The distinction between "Gross" and "Net" in national income accounting primarily hinges on the treatment of depreciation (consumption of fixed capital).
Statement-wise Analysis:
- Statement 1 is Incorrect.
In economics, the term "Gross" indicates that the value includes the consumption of fixed capital (depreciation). Gross Value Added represents the value created before deducting the wear and tear of capital assets used in the production process. If depreciation were excluded (subtracted), the metric would be termed "Net Value Added."
- Statement 2 is Correct.
Net Value Added (NVA) is derived by subtracting depreciation from Gross Value Added. The formula is:
Net Value Added = Gross Value Added - Depreciation.
This adjustment accounts for the capital assets consumed or worn out during the production period. - Statement 3 is Correct.
GVA measures the value of production, not merely sales. The value of output is defined as Sales + Change in Stock (Inventories). If a firm produces goods but does not sell them within the accounting period, these goods are treated as an addition to the firm's inventory. In national accounts, this accumulation of unsold stock is classified as inventory investment and is included in the calculation of GVA.
Key Takeaway:
"Gross" variables in national income accounting include depreciation, whereas "Net" variables exclude it. Furthermore, GVA accounts for total production, treating unsold goods as inventory investment.