State the components of domestic factor income. To find out national income, what is added to it and why
Answers
Broadly speaking, components of domestic income (NDPFC) are Compensation of employees.
...
Each component is explained below:
Compensation of employees (traditionally called Wages): ...
Rent and Royalty: ...
Interest: ...
Corporate (Profit) tax: ...
Dividend: ...
Undistributed Profit:
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Answer:
The components of domestic factor income are:
1) Compensation of employees:
2)* Rent and Royalty
3)* Interest
4)* Profit
5) Mixed Income of the self-employed
*2, 3, and 4 come together to constitute Operating Surplus
To find out National Income from Domestic Income, Net Factor Income From Abroad (NFIA) is added to it.
Explanation:
1) Compensation of employees:
Compensation of employees refers to the factor income earned by labor in exchange of their factor services. Its comprises the following:
a) Wages and Salaries
b) Employers' contribution to social security and
c) Retirement Pension.
2) Operating Surplus:
Operating surplus is the factor payments arising from property as (rent, royalty, and interest) and income from enterprise (profit).
3) Mixed Income of the self-employed:
Mixed income of the self employed means aggregated factor payments received by the self-employed professionals, who are not distinguishable.
To find out national income through domestic income, Net Factor Income From Abroad (NFIA) is added to it.
This is done because National Income comprises production activities done by non-residents, and other components that has to be taken into consideration.
Components of NFIA:
1) Net Compensation of Employees
2) Net income from property and entrepreneurship
3) Net Retained Earnings
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