Interest paid abroad in GNP is what type of item?
Answer and explanation
Correct answer: Factor income paid to abroad
Interest paid to foreign lenders is treated as factor income paid abroad because it is a return to the factor of capital supplied by non-residents. It reduces net factor income from abroad: NFIA equals factor income received from abroad minus factor income paid abroad. It is not export payment or a transfer receipt. Therefore, option A correctly identifies the item and its effect on GNP calculations.
Frequently asked questions
What is the correct answer to this question?
Factor income paid to abroad
Why is this the correct answer?
Interest paid to foreign lenders is treated as factor income paid abroad because it is a return to the factor of capital supplied by non-residents. It reduces net factor income from abroad: NFIA equals factor income received from abroad minus factor income paid abroad. It is not export payment or a transfer receipt. Therefore, option A correctly identifies the item and its effect on GNP calculations.
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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