Question

If a Japanese company opens a new factory in South Korea, it makes a. foreign direct investment. The factory will make a bigger impact on South Korea’s GDP than on its GNP. b. foreign direct investment. The factory will make a bigger impact on South Korea’s GNP than on its GDP. c. foreign portfolio investment. The factory will make a bigger impact on South Korea’s GDP than on its GNP. d. foreign portfolio investment. The factory will make a bigger impact on South Korea’s GNP than on its GDP.

Answer 1

foreign direct investment. The factory will make a bigger impact on South Korea’s GDP than on its GNP.

Answer: Option A.

Explanation:

Foreign direct investment is the investment that a firm or a company which is not a national or a domestic company, rather is an international company but invests in the national economy.

With this investment, the employment opportunities in the economy will increase, there would be increase in the investment in the economy in the form of transport and communications and so on. Thus it would increase the GDP of the country.