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 find the factor income paid to abroad, we need to understand the relationship between various components of national income accounting. Given: 

• 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

We can use the following relationship:

GNP_FC = NNP_FC + CFC

So first, calculate GNP_FC:

GNP_FC = 2400 + 150 = 2550 crores

We also know that:

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

We want to find the Factor Income Paid to Abroad (FIPA):

GDP_FC = Domestic Income = 2500 crores

Substitute the values into the equation:

2550 = 2500 + (300 - FIPA)

Simplifying:

2550 = 2500 + 300 - FIPA

2550 = 2800 - FIPA

FIPA = 2800 - 2550 = 250 crores

Thus, the factor income paid to abroad is 250 crores.

Answer 2

To solve this problem, we need to determine the factor income paid to abroad. We can use the formula for Net National Product (NNP) at factor cost, which is given by:

NNP_fc = Domestic Income + Net Factor Income from Abroad - Consumption of Fixed Capital

Rearranging the terms, we can express the Net Factor Income from Abroad (NFIA) as:

NFIA = NNP_fc - Domestic Income + Consumption of Fixed Capital

We know that:

• Domestic Income = 2500 crores
• Factor Income from Abroad = 300 crores
• Consumption of Fixed Capital = 150 crores
• NNP_fc = 2400 crores

Let's calculate the NFIA:

NFIA = 2400 - 2500 + 150 = 50 crores

NFIA is the difference between factor income from abroad and factor income paid to abroad. Therefore:

Net Factor Income from Abroad = Factor Income from Abroad - Factor Income Paid to Abroad
50 = 300 - Factor Income Paid to Abroad

Solving for Factor Income Paid to Abroad:

Factor Income Paid to Abroad = 300 - 50 = 250 crores

However, a mistake in calculation was recognized when comparing to the possible answers provided. Trying again: Regarding NNP calculation,

2400 = 2500 + 300 - Factor Income Paid to Abroad - 150

2400 = 2650 - Factor Income Paid to Abroad

Factor Income Paid to Abroad = 2650 - 2400 = 250 crores

Thus, the correctly re-evaluated Factor income paid to abroad is 250 crores.