Which of the following incomes is NOT included in the factor income?

The correct answer is Scholarship of a student.

Key Points

• Factor income includes earnings from production factors like land, labor, and capital, which are rent, wages, and interest respectively.
• Scholarships are financial aids provided to students to support their education and do not arise from the production process.
• Factor income typically covers payments for the services of factors of production in the production of goods and services.
• Examples of factor income include rent (land), wages (labor), and interest (capital).
• Scholarships are considered transfer payments and are not included in the national income calculations.

Additional Information

• Factor Income
  • Factor income refers to the income derived from the factors of production: land, labor, and capital.
  • This income includes wages, interest, rent, and profits.
  • It is a key component in the calculation of national income and GDP.
• Transfer Payments
  • Transfer payments are non-exchange transactions where no goods or services are exchanged.
  • Examples include scholarships, social security benefits, and unemployment benefits.
  • They are not included in national income as they do not reflect the production of goods and services.
• National Income
  • National income is the total value of all goods and services produced by a country over a specific period, typically a year.
  • It includes factor incomes earned by residents from the production of goods and services.
  • It is an important indicator of the economic health of a country.
• Components of GDP
  • Gross Domestic Product (GDP) includes consumption, investment, government spending, and net exports.
  • Factor incomes are part of the income approach to calculating GDP.
  • Transfer payments are excluded from GDP calculations as they do not represent production.