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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.
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 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 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
Why are we studying Net Factor Income from Abroad?
It is used to calculate GNP
(Gross National Product)
