Q:

What is the definition of net factor income from abroad?

A:

Quick Answer

Net factor income from abroad is the amount of money made in a country other than one's legal home country, according to Investopedia. This term applies to income made by either an individual or a business and refers to income made abroad that is then sent back to the home country. This income can come in the form of wages or investments.

Continue Reading
What is the definition of net factor income from abroad?
Credit: Alex Segre Moment Getty Images

Full Answer

According to Investopedia, the net factor income from abroad is usually negligible, and is usually offset by wages and investments paid to non-residents in the home country. In the United States, this contributes to a small portion of the economy. However, for small or developing countries, the net factor income from abroad can be a significant addition to the gross national product.

As Ready Ratios explains, net factor income from abroad is used to calculate a nation's gross national product. The gross national product is found by adding together the gross domestic product, which is money earned in the home country by residents, and the net factor income from abroad. Net factor income from abroad is the key to understanding the difference between gross national product and gross domestic product, as gross domestic product is simply the gross national product minus the net factor income from abroad.

Learn more about Economics

Related Questions

Explore