Question

3. which of the following weeks increase US gross national product(GNP) but not gross domestic product (GDP) ?

a. an increase in Honda's output in North Carolina which is sold in Japan

b. an increase in Ford output in japan which is exported to be sold in china

c. an increase in toyota output in china which is purchased by US residnents living in china

d. an increase in toyotas out put in japan which is exported to the US for purchase there

e. an increase in General motors output in Detroit which is sold in france

Answer 1

It shall be noted that US GNP = US GDP + Net Factor Income from abroad

So, evaluate the options that could be categorized as Net Factor Income from abroad.

a.

Honda's output produced in North Carolina - Would increase US GDP but not US GNP

b.

Increase in Ford output in Japan exported to China - Ford is the US company - It would contribute to net factor income from abroad - would  increase US gross national product(GNP) but not the gross domestic product (GDP)

c.

Increase of Toyota output in China, purchased by US residents living in China-US expenditure in a foreign country - not a net factor income earned from abroad - would not affect the US GNP

d.

Increase in Toyota output in Japan exported to the US for purchase - It is imported in the US - Would affect US GDP but not US GNP

e.

Increase in GM output in Detroit, sold in France - Would affect US GDP but not US GNP

Hence, the correct answer is - b. an increase in Ford output in japan which is exported to be sold in china