2. Would the following transactions be part of U.S. GDP, U.S. GNP, both or neither? a....

2. Would the following transactions be part of U.S. GDP, U.S. GNP, both or neither?

a. You received dividends from a company based in Germany.

b. Colin Firth, a British citizen, earns money acting in a movie made in Hollywood.

c. You buy a Volkswagen automobile which was made in Germany.

d. An American citizen works at a Honda factory in South Carolina

Expert Solution

GDP is the money value of all goods and services that are produced within the domestic territory in a a given period of time.

whereas GNP is the money value of all good and services that are produced within the domestic territory + Net factor income earned from abroad by its citizens (factor income earned by domestiv individuals in foreign - factor income earned by foreign firms)

a. Dividend recieved by US citizen will be included in US GNP, as it is net factor income earned from abroad.

b. Colin, a british citizen earning money in movie made in hollywood will come in US GDP, as the income is earned within the domestic territory of US.

on the other hand it will be deducted from US GNP as it is form of factor income earned by foreigner

c. You buy a Volkswagen automobile which was made in Germany

It will not come in both US GDP and US GNP (as the car is made in germany and hence will be included in their gdp)

d.An American citizen works at a Honda factory in South Carolina

It will come in both US GDP and US GNP (as individual is working in domestic economy and is part of domestic production)

Rahul Sunny answered 1 month ago

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