Suppose that in Wentworth most residents supply factors of production to foreign firms, while producers in Wentworth never employ factors owned by residents of other countries.Which of the following statements is true for Wentworth?

Question

Quizplus · Accepted Answer

Since the residents of Wentworth are supplying factors of production to foreign firms, their income is included in GDP (which measures the production within a country's borders), but not in GNP (which measures the income of a country's residents regardless of where they produce). On the other hand, producers in Wentworth do not employ factors owned by residents of other countries, so the income they generate goes to Wentworth's residents and is included in GNP, but not in GDP. Therefore, GNP includes the income earned by Wentworth's residents from supplying factors of production to foreign firms, while GDP does not. This means that GNP will be greater than GDP in Wentworth, making option B the correct answer.

Suppose That in Wentworth Most Residents Supply Factors of Production