An automobile manufacturing plant opens in Alabama, and its owner, all of the workers, and all raw materials are from Japan. How would the purchase of an automobile from this plant change U.S. GDP and GNP?
A) It would increase GNP and GDP.
B) It would increase GNP and leave GDP unchanged.
C) It would increase GDP and leave GNP unchanged.
D) It would leave both GDP and GNP unchanged.

Question

Quizplus · Accepted Answer

The purchase of an automobile from this plant would increase GDP as it represents a final good sold within the US borders. However, since all workers and raw materials are from Japan, the profits of the plant would be repatriated to Japan and not included in US GNP. Therefore, the purchase of an automobile from this plant would leave GNP unchanged.

An Automobile Manufacturing Plant Opens in Alabama, and Its Owner