Check sibling questions

We know that

Factors of Production are Land, Labour, Capital and Entrepreneurship

Also

Factor Payment is Remuneration paid to Factors of Production.

like Wages, Interest, Rent, Profit.

These factor Payments are Factor Income of Receiving Parties.

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What is Factor Income?

It is the income derived by owners from Factors of Production

Example of Factor Income

Different Factor of Production Different Factor Income (or Factor Payment)
Labour Wages
Land Rent
Capital Interest/Dividend
Entrepreneurship Profit

 

What is Factor Income Received from Abroad?

It is income Received by Domestic Factors of Production from outside country.

Example

An Indian Employee is working from home for his software company based in USA

In this case, Indian Employee will receive salary(factor income) from USA

So we say ,this is Factor Income Received from Abroad

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What is Factor Income Paid Abroad?

It is income by Foreign Factors of Production from domestic territory (India)

Example

A US Employee is working from home for his software company based in India

In this case, US Employee will receive salary(factor income) from India

So we say, this is Factor Income Paid Abroad

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What is Net Factor Income from Abroad (NFIA)?

It is Difference between

Factor Income Earned from Abroad

and

Factor Income Paid to Abroad

It can be Positive or Negative

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Why are we studying Net Factor Income from Abroad?

It is used to calculate GNP

(Gross National Product)


Transcript

What is Net Factor Income from Abroad? We know that Factors of Production are Land, Labour, Capital and Entrepreneurship Also Factor Payment is Remuneration paid to Factors of Production like Wages, Interest, Rent, Profit. These factor Payments are Factor Income of Receiving Parties Example Suppose A works in Factory as a labour Factory pays him wages A Labour Factory Wages In this Case A is Factor of Production In this Case Factory is using this Factor of Production Wages earned is Factor Income of A Wages paid is Factor Payment of Factory What is Factor Income? It is the income derived by owners from Factors of Production Example of Factor Income Different Factor of Production Different Factor Income (or Factor Payment) Labour Wages Land Rent Capital Interest/Dividend Entrepreneurship Profit What is Factor Income Received from Abroad? It is income Received by Domestic Factors of Production from outside country. Example An Indian Employee is working from home for his software company based in USA In this case, Indian Employee will receive salary(factor income) from USA So we say ,this is Factor Income Received from Abroad What is Factor Income Received from Abroad? Employee India Job Salary in Dollar Software Company USA Employee is Factor of Production He Receives Salary from USA He is Factor income from Abroad What is Factor Income Paid Abroad? It is income by Foreign Factors of Production from domestic territory (India) Example A US Employee is working from home for his software company based in India In this case, US Employee will receive salary(factor income) from India So we say, this is Factor Income Paid Abroad What is Factor Income Paid Abroad Employee USA Job Software Company India Salary in Rupees Employee is Factor of Production of USA He Receives Salary from India He is Factor income to Abroad What is Net Factor Income from Abroad (NFIA) It is Difference between Factor Income Earned from Abroad and Factor Income Paid to Abroad It can be Positive or Negative What is Net Factor Income from Abroad? Factor Income Received from Abroad Less Factor Income Paid to Abroad 400 300 400 600 Net Factor Income form Abroad (NFIA) 100 -200 NFIA Positive Good for Economy NFIA Negative Bad for Economy Why are we studying Net Factor Income from Abroad? It is used to calculate GNP (Gross National Product)

CA Maninder Singh's photo - Co-founder, Teachoo

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CA Maninder Singh

CA Maninder Singh is a Chartered Accountant for the past 12 years and a teacher from the past 16 years. He teaches Science, Economics, Accounting and English at Teachoo