A country in which a significant fraction of domestic production takes place in foreign-owned factories and facilities is most likely a country where

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Question restatement: A country with a significant portion of domestic production happening in foreign-owned factories and facilities is likely to have a certain relationship between GDP and GNP.
Option 1: "GDP is much larger than GNP." This aligns with the idea that GDP measures the value of output within a country’s borders, including production by foreign-owned facilities located there, whereas GNP adjusts for income earned by residents abroad and excludes income earned by foreign residents domestically. When foreign-owned production is substantial, GDP rises due to domestic activity, while GNP grows more slowly because much of the income generated by that production goes to foreign owners. Consequently, GDP tends to be larger than GNP in such a scenario.
Option 2: "GNP is much larger than GDP." If many production activities were owned by residents or domestic firms earning income abroad, GNP could exceed GDP. However, the premise specifies that a significant fraction of production is foreign-owned within the country, which would contribute to higher GDP rather than GNP, making this option unlikely.
Option 3: "GDP is equal to GNP." Equality would require the net flow of incomes from abroad to be zero, which contradicts the described situation of substantial foreign ownership of domestic production. Therefore, this equality is unlikely in the given context.
Option 4: "GDP is not comparable to GDP." This option is self-contradictory and nonsensical, as GDP is a defined measure of a country’s within-border production and is comparable across time or countries with the appropriate price and exchange-rate adjustments; the phrasing here does not reflect a valid comparative statement.
In summary, the presence of a large amount of domestic production occurring in foreign-owned facilities increases GDP due to within-border activity, while GNP grows less because a portion of that income goes to foreign owners. This makes GDP exceed GNP in this scenario, while the other options conflict with the described economic structure or rely on inaccurate or illogical statements.

Spr25_ECON001A_39193 F. Quiz #3: Chapter 8

A country in which a significant fraction of domestic production takes place in foreign-owned factories and facilities is most likely a country where

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