In GNP calculation, rent paid from the country to a foreigner will be treated as what?
Answer and explanation
Correct answer: Factor income paid to abroad
Rent paid to a foreigner for the use of property or another factor located in the domestic territory is factor income paid to abroad. Net factor income from abroad (NFIA) equals factor income received from abroad minus factor income paid abroad. Since this rent is paid outward, it reduces NFIA and therefore reduces GNP relative to GDP. It is not an indirect tax or depreciation.
Frequently asked questions
What is the correct answer to this question?
Factor income paid to abroad
Why is this the correct answer?
Rent paid to a foreigner for the use of property or another factor located in the domestic territory is factor income paid to abroad. Net factor income from abroad (NFIA) equals factor income received from abroad minus factor income paid abroad. Since this rent is paid outward, it reduces NFIA and therefore reduces GNP relative to GDP. It is not an indirect tax or depreciation.
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 - GNP.
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