Question

When a significant fraction of domestic production takes place in foreign-owned facilities, a country's difference between GDP and GNP is as follows:

A) GNP will be a more accurate measure of the level of production within the country's borders.
B) GDP will be much larger than GNP.
C) GNP will be almost identical to GDP.
D) GNP will be closer to zero.

Answer 1

When a significant fraction of domestic production takes place in foreign-owned facilities, GNP will be a more accurate measure of the level of production within the country's borders.

Step-by-step explanation:

The question is asking how a significant fraction of domestic production taking place in foreign-owned facilities affects the difference between GDP and GNP. When domestic production is happening in foreign-owned facilities, that production is included in GDP because it occurs within the country's borders. However, it is not included in GNP because GNP measures what domestic businesses and labor produce, wherever they are located. Therefore, the correct answer is A) GNP will be a more accurate measure of the level of production within the country's borders.