An Example of How GNP Accounts for Services Provided by Foreign-Owned

question 23

Multiple Choice

An example of how GNP accounts for services provided by foreign-owned capital (and GDP does not) is

• A) earnings of a Spanish factory with British owners counts only in Spain's GDP.
• B) earnings of a Spanish factory with British owners counts only in Britain's GNP.
• C) earnings of a Spanish factory counts in Spain's GNP but are part of Britain's GDP.
• D) earnings of a Spanish factory counts in Spain's GDP but are part of Britain's GNP.
• E) earnings of a Spanish factory counts in Spain's GNP but not in Britain's GDP or GNP.

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Definitions:

Financial Asset

Any asset that is cash, an equity instrument of another entity, or a contractual right to receive cash or another financial asset.

Risk-free Asset

An investment with zero default risk, often assumed to be government bonds, providing a guaranteed return.

Average Returns

The mean financial return of an investment over a specified period.

Tax Cut

A reduction in the rate of taxes imposed by the government.