What is the industrial origin approach?


Quick Answer

The industrial origin approach is an approach to computing a nation's GNP based on adding up the gross value of primary, secondary and tertiary industries. These industries are agricultural, manufacturing and service. This approach is just one of many that can be used to try and create an estimate of the true GNP of a nation. However, if done properly, all methods should generate the same GNP figure.

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What is the industrial origin approach?
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Full Answer

A nation's gross national product is a measure of the market value of the goods and services produced within a country along with the income of citizens from overseas investments, according to Investopedia. There are different ways to measure a nation's GNP. Some focus on expenditures or things consumed within the country. Other methods focus on incomes and the fact that they correspond to an output. As a contrast to these two methods, the industrial origin approach focuses on three subgroups of a nation's industry. Instead of tracing expenses and purchases, this method sums up the total values of industries and adds them together. This means that an industry's expenses must be subtracted from its income before it can be added to avoid duplication issues. The industrial origin approach will yield the same results as any expenditure or income based model of GNP calculation.

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