A country in which a significant fraction of domestic production takes place in foreign-owned factories and facilities is most likely a country where
A)GNP is much larger than GDP.
B)GDP is much larger than GNP.
C)GDP is equal to GNP.
D)GDP is not comparable to GDP.

Question

Quizplus · Accepted Answer

If a significant fraction of domestic production takes place in foreign-owned factories and facilities, it means that the profits generated by those facilities will go to the foreign owners, rather than staying within the country. Therefore, Gross Domestic Product (GDP), which measures the total value of goods and services produced within a country's borders, will be larger than Gross National Product (GNP), which measures the total value of goods and services produced by a country's residents, including those who are located abroad. Thus, the country is likely to have a situation where GDP is much larger than GNP.

A Country in Which a Significant Fraction of Domestic Production