If NFIA is negative, what will be the effect on NNP?
Answer and explanation
Correct answer: NNP will be less than NDP
The relationship is NNP = NDP + NFIA. If NFIA is negative, adding it reduces the value of NDP, so NNP becomes less than NDP. A negative NFIA means that factor payments made to the rest of the world exceed factor income received from abroad. NNP equals NDP only when NFIA is zero. Thus, option B is correct.
Frequently asked questions
What is the correct answer to this question?
NNP will be less than NDP
Why is this the correct answer?
The relationship is NNP = NDP + NFIA. If NFIA is negative, adding it reduces the value of NDP, so NNP becomes less than NDP. A negative NFIA means that factor payments made to the rest of the world exceed factor income received from abroad. NNP equals NDP only when NFIA is zero. Thus, option B is correct.
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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