Question

Define Net Factor Income from Abroad (NFIA) and discuss its components.

Answer 1

Net Factor Income from Abroad (NFIA) is the difference between the total income earned by the residents of a country from abroad and the income earned by foreign residents within the country. It represents the net income generated through cross-border investment and labor.

Components of NFIA: 
• Income Earned by Residents Abroad: This includes income from foreign investments, wages earned by citizens working in foreign countries, and any other income generated by the country’s residents from abroad. 
• Income Paid to Foreign Residents: This is the income earned by foreign nationals working in the country, along with the income earned by foreign investors in the country. 

NFIA = Income earned by residents abroad - Income paid to foreign residents.