Question

Ford produces a variety of cars in Australia. Which of the following statement is true?: A-...

Ford produces a variety of cars in Australia. Which of the following statement is true?:

A- the value of this output would be counted when calculating GNP for both Australia and the U.S.

B- the value of this output would be counted when calculating GDP for both Australia and the U.S.

C- the value of this output would be counted when calculating GNP for Australia, and GDP for the U.S

D- the value of this output would be counted when calculating GDP for Australia and GNP for the U.S

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Answer #1

GNP = GDP + Net foreign factor income.

The cars are produced in Australia for which Australia uses its domestic factors of production as well as foreign factors of production (since Ford is a US company). By providing factors, US is getting factor income, which is foreign factor income for US. Hence, while calculating GNP of US, this income will be added, while for Australia, the factor income is all domestic. Hence, it will add to GDP of Australia. Therefore, option (D) is correct., i.e.,

the value of this output would be counted when calculating GDP for Australia and GNP for US.

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