Question

'Net foreign factor income' in the national income accounts refers to the difference between
A) the income Americans gain from supplying resources abroad and the income that foreigners earn by supplying resources in the U.S
B) the value of the products sold by Americans to other nations and the value of products bought by Americans from other nations
C) the value of investments that Americans made abroad and the value of investments made by foreigners in the U.S
D) the income earned by the Americans in the US minus the income earned by foreigners in the US

Answer 1

Answer to question

A. The income Americans gains from supplying resources abroad and income that foreigners earn by supplying resources in USA.

NET FOREIGN FACTOR INCOME : it refers to the difference betweenbfactor income received from the foreign/abroad and factor income paid to the foreigners/ abroad

NFIA= factor income earned from foreign/abroad- factor income paid to foreigners/abroad.

Components of nfia

1. Net compensation to employees: it refers to difference between income from work received by the country people living Or employed in foreign /abroad and similar payments made to people of foreign country works or staying Or employed within the country

2. Net income from property and entrepreneurship: it refers to the difference between income from property and entrepreneurship received by people of the contry and similar payment made to people of foreign country.

3. Net retained earnings: it refers to the difference between retained earnings of companies located in foreign/abroad and retained earnings of foreign companies located within country.

So nfia includes supply of resources not products

Because products solds and puchases to foreign country and from foreign country is known as exports and imports. But nfia includes services also

The value of investment that Americans made abroad and value of investments made by foreigners in the USA is also not NFIA because nfia includes services and rental income also