Question

If the domestic income of an economy is 2500 crores, the factor income from abroad is 300 crores, the consumption of fixed capital is 150 crores and Net National Product at factor cost is 2400 crores, then the Factor income paid to abroad will be:

• A. 100 crores
• B. 250 crores
• C. 400 crores
• D. (-) 100 crores

Answer 1

The Correct Option is B

To determine factor income paid to abroad, we must analyze national income accounting components. The following data is provided:

• Domestic Income (DI) = 2500 crores
• Factor Income from Abroad (FIFA) = 300 crores
• Consumption of Fixed Capital (CFC) = 150 crores
• Net National Product at Factor Cost (NNP_FC) = 2400 crores

The calculation proceeds as follows:

First, calculate Gross National Product at Factor Cost (GNP_FC):

GNP_FC = NNP_FC + CFC

GNP_FC = 2400 + 150 = 2550 crores

Next, utilize the relationship between GNP_FC and Gross Domestic Product at Factor Cost (GDP_FC):

GNP_FC = GDP_FC + (Factor Income from Abroad - Factor Income Paid to Abroad)

We know that GDP_FC is equivalent to Domestic Income:

GDP_FC = 2500 crores

Now, substitute the known values to find the Factor Income Paid to Abroad (FIPA):

2550 = 2500 + (300 - FIPA)

Simplify the equation:

2550 = 2500 + 300 - FIPA

2550 = 2800 - FIPA

Isolate FIPA:

FIPA = 2800 - 2550

FIPA = 250 crores

Therefore, the factor income paid to abroad amounts to 250 crores.