Question

When an Australian-owned firm operates in South Korea, the profits that this Australian firm brings back to Australia are included in the Australian ______ and the South Korea ______.

Answer 1

Australina GNP and the South Korean GDP

Explanation:

The GDP measures the market value of all goods and services produced in a country in a specific period of time. The GNP measures the market value of all goods and services produced by all citizens of a country (independently if those citizens are in or out of the country). In this problem, the company is Australian-owned, then their profits will sum in the Australian GNP, but because they are producing in South Korea, they cannot sum their profits in the Australian GDP (this is only for production due in Australia). The opposite happens with South Korea, they cannot add the company profits in their GNP because the company is Australian-owned, but they can add the company profits in their GDP.