Real-Time Data Analysis Exercise The following table contains Gross Domestic Product (GDP) and Gross National Product (GNP) from FRED for the first quarter of 2024. link [table]
Title | Value Gross Domestic Product | $28,624.069 billion Gross National Product | $28,706.261 billion
[/table] Since GNP exceeds GDP, it can be concluded that foreign production by U.S. firms Blank 1 Question 28[select: , is exceeded by, exceeds] U.S. production by foreign firms. For countries having a significant fraction of domestic production occurring in foreign-owned facilities, the GDP will likely Blank 2 Question 28[select: , be exceeded by, exceed] GNP.

Question

BlackTom AI · Accepted Answer

We start by understanding what GDP and GNP measure and what a difference between them implies in this context.

Blank 1: foreign production by U.S. firms ____ U.S. production by foreign firms.
- If GDP is the value of production within the country’s borders, and GNP is GDP plus income from U abroad minus income paid to foreigners, then a situation where GNP > GDP suggests that U.S.-owned production abroad is substantial relative to foreign-owned production within the U.S. In other words, U.S. firms are producing more overseas (and thus earning income from abroad) than foreigners are producing in the U.S. Therefore, foreign production by U.S. firms exceeds U.S. production by foreign firms within the U.S. This matches the option that would fill Blank 1 with exceeds.
- The alternative option would imply the opposite relationship, which would be inconsistent with a larger GNP compared to GDP, so saying “is exceeded by” would misstate the relative magnitudes in this scenario.

Blank 2: For countries having a significant fraction of domestic production occurring in foreign-owned facilities, the GDP will likely ____ GNP.
- When many domestic activities are performed in facilities owned by foreigners, those production activities contribute to GDP (since they occur within the country) but not to GNP (since the owners are foreign and the income accrues abroad rather than to residents). In such cases, GDP tends to be greater than GNP. The natural phrasing is that GDP will likely exceed GNP. Thus, Blank 2 should be filled with exceed.
- Conversely, if one were to fill Blank 2 with “be exceeded by,” that would produce a statement suggesting GNP > GDP, which contradicts the typical outcome in the described scenario of foreign-owned domestic production.

Putting it together, the two blanks are filled as follows: Blank 1: exceeds; Blank 2: exceed.

In sum, the logic hinges on the distinction between domestic production (GDP) and resident-owned production abroad (contributing to GNP). When U.S. firms produce abroad, GNP can rise above GDP, but when foreign-owned facilities operate domestically, GDP rises above GNP. These relationships are reflected in the chosen answers.

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