Net Factor Income from Abroad distinguishes GNP from GDP. It is the difference between factor incomes (Rent, Wages, Interest and Profit) entering Ireland and factor incomes sent from Ireland to countries abroad.
Gross Domestic Product +
Net Factor Income from Abroad = Gross National Product
|Gross Domestic Product||180|
|Factor Incomes earned by Irsh nationals abroad||+ 60|
|Factor Incomes earned by foreign nationals in Ireland||- 140||- 80|
|Gross National Product||100|
Factor incomes sent home such as wages earned by Irish people and rents earned by Aer Lingus on aircraft rented to foreign airlines amounts to + 60. It is positive because it is money coming into the country and adding to the GDP.
Factor incomes sent abroad such as interest on the National Debt and repatriated profits amount to – 140. It is negative because it is money leaving Ireland as in the case of repatriated profits where profits made by subsidiaries of the multinational companies are transmitted to the parent company situated abroad.
Gross National Product is 100 [180 – 80 = 100]. Gross National Product would be a better indicator of the standard of living in Ireland because it takes Net Factor Income from Abroad into account. The people in the example above share in the 100 not the 180.
The stock of factors of
The degree of technology
The international economic climate
The domestic economic climate
Stock of Factors of Production
An economy is classified as rich or poor according to a number of factors, one of which is its factor of production such as its labour force or its stock of capaital or the quality and quantity of land . The more educated, skillful, and healthy a country’s workforce the greater the advantagean economy has in its dealings in the world of trade.
Degree of Technology
If the labour force is highly skilled, then it can be of considerable benefit to an economy in its ability to apply technology irresspective of its level of complexity. The more advanced the technology the more productive the economy.
The output of the economy can be affected by the general performance of the world economy. If there is a period of strong economic perfdormance the Irish economy will reap rewards by selling in buoyant markets.
Domestic Economic Climate
If the Irish economy is experiencing a boom, it will permeate through to all sectors of the economy. "With a rising tide all boats rise"