Suppose that an American opens and operates a candy factory in Finland. This is an example of a. foreign portfolio investment. We can expect it to increase Finnish GNP more than Finnish GDP. b. foreign portfolio investment. We can expect it to increase Finnish GDP more than Finnish GNP. c. foreign direct investment. We can expect it to increase Finnish GDP more than Finnish GNP. d. foreign direct investment. We can expect it to increase Finnish GNP more than Finnish GDP.

Answer: c. foreign direct investment. We can expect it to increase Finnish GDP more than Finnish GNP.

Explanation:

By directly opening a company in Finland, the American company has engaged in Foreign Direct Investment because it has actual control as it operates the candy factory.

Now, as you may or may not know, Gross Domestic Product (GDP) is the total amount of goods Produced IN a country in a given period which is usually a year.

Gross National Product on the other hand, is the GDP + (Net income from foreign Investment). That means when calculating GNP, you take do this,

GNP = GDP + Income from foreign Investment - income from foreign Investment within the country.

Essentially it removes foreign owned production from the GDP and adds the country's own foreign investments in other countries.

What this means is that, the GDP will be strengthened by the the opening of the company in Finland by the Americans because it will contribute to GDP. But GNP will not be so lucky because when counting GNP, the income from the Candy company will be subtracted because it is foreign owned.

If you need any clarification do comment.