What is the expected impact on the UK’s GDP and GNP when Toyota opens a new manufacturing facility in northern England?

Multiple choice question for Comparative GDP. Select an option, then review the explanation below.

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All of the above statements are incorrectThe UK has experienced a rise in foreign portfolio investmentThe UK’s GDP will increase by a smaller amount than its GNP once production beginsThe UK’s GDP will increase more than its GNP after the plant starts operatingNo change will occur in either GDP or GNP

Explanation

When a foreign company like Toyota establishes a production plant in the UK, the output generated contributes directly to the UK’s GDP since it is produced within the country. However, because the profits are repatriated to Japan, the UK’s GNP (which accounts for income earned by residents) will not increase as much as GDP. Therefore, the UK’s GDP rises more than its GNP once production starts.

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What is the expected impact on the UK’s GDP and GNP when Toyota opens a new manufacturing facility in northern England?

Explanation

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