Assertion (A): For a country with many foreign-owned factories and few residents working abroad, GDP is likely to be greater than GNP.
Reason (R): The profits of foreign-owned factories are produced in the country but earned by non-residents.

Both A and R are true, and R is the correct explanation of A.Correct answerYour answerBoth A and R are true, but R is not the correct explanation of A.Correct answerYour answerA is true, but R is false.Correct answerYour answerA is false, but R is true.Correct answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer A

Correct answer: A

Those profits are in GDP but flow out, making NFIA negative.
With NFIA below zero, GNP < GDP; R explains why.

Concept: Foreign ownership and NFIA
Typical timeTypical: 100 s
Your timeYours: —

The rule this testsDomestic and national: NFIA

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Ten questions from National Income Aggregates & GDP, at your own pace.

Assertion (A): For a country with many foreign-owned factories and few residents working abroad, GDP is likely to be greater than GNP.Reason (R): The profits of foreign-owned factories are produced in the country but earned by non-residents.

Explanation

Assertion (A): For a country with many foreign-owned factories and few residents working abroad, GDP is likely to be greater than GNP.
Reason (R): The profits of foreign-owned factories are produced in the country but earned by non-residents.