If NFIA is negative, what happens when deriving NNP from NDP?
Answer and explanation
Correct answer: NNP will be less than NDP
The conversion formula is NNP = NDP + NFIA, where NFIA means Net Factor Income from Abroad. If NFIA is negative, income paid to foreign factors is greater than income received from domestic factors abroad. Adding a negative amount reduces NDP, so NNP becomes less than NDP. NNP equals NDP only when NFIA is zero, and it exceeds NDP when NFIA is positive.
Frequently asked questions
What is the correct answer to this question?
NNP will be less than NDP
Why is this the correct answer?
The conversion formula is NNP = NDP + NFIA, where NFIA means Net Factor Income from Abroad. If NFIA is negative, income paid to foreign factors is greater than income received from domestic factors abroad. Adding a negative amount reduces NDP, so NNP becomes less than NDP. NNP equals NDP only when NFIA is zero, and it exceeds NDP when NFIA is positive.
Which subject and chapter does this question cover?
This is a Class 12 Economics question. Chapter: National Income and Related Aggregates. Topic: Aggregates related to national income - NNP.
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