Suppose that in the country of Welworth, most residents supply factors of production to foreign firms, while producers in Welworth never employ factors owned by residents of other countries. Which of the following statements is true of the economy of Welworth?
A) Welworth's GDP is greater than its GNP.
B) Welworth's GDP is less than its GNP.
C) Both GDP and GNP are about the same in Welworth.
D) Welworth's GDP exceeds GNP by an amount equal to depreciation plus indirect business taxes.

Question

Quizplus · Accepted Answer

Welworth's GNP is greater than its GDP because GNP includes the income earned by residents from abroad, while GDP only includes income generated within the country. Since residents supply factors to foreign firms, their income from abroad increases GNP.

Suppose That in the Country of Welworth, Most Residents Supply