Question

Is it necessary that domestic income is always less than national income in 6 marks I

Answer 1

Domestic factor Income will be less than the national Income when factor income earned from income Abroad is more than factor income paid by Abroad

Answer 2

Solution : No, it is not necessary that the domestic income is always less than national income. The reasons of this is as follows

• Domestic income (NDP fc) is the value of of final goods and services produced within the domestic region of the country
• The national income (NNP fc)is the income produced of final goods and services that are produced domestic and in foreign also.
• So the national income is the sum of domestic income and  net foreign income i.e. NNP fc = NND fc + NFIA where NFIA is the net factor income from abroad
• Net factor income from abroad is factor income from abroad - factor income to abroad
• And if factor income to abroad is greater than factor income from abroad then Net factor income from abroad is negative
• It means that in this case domestic income is greater than national income.
• So it is not necessary that the domestic income is always less than national income.

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