Within the expenditure approach, there are two approaches:
Under this approach, GDP is calculated as the sum of value added at each stage of production and distribution. For example, suppose the raw material was worth $100, it was processed and converted into semi-finished goods worth $120. Then these semi-finished goods are converted into finished goods worth $150. The same product is sold in retail at $180. The sum-of-value-added approach calculates the total value as follows:
|Stage||Sale Value||Value Added|
|Sum of Value Added||$180|
Under this approach, GDP is calculated by summing the values of final goods and services produced during the period. In the above example, we will directly take the value $180 of the product.