
Net Foreign Factor Income (NFFI)
Net foreign factor income (NFFI) is the difference between a nation’s gross national product (GNP) and its gross domestic product (GDP). Net foreign factor income (NFFI) is the difference between a nation’s gross national product (GNP) and gross domestic product (GDP). NFFI is generally not substantial in most nations since payments earned by citizens and those paid to foreigners more or less offset each other. Net foreign factor income (NFFI) is the difference between a nation’s gross national product (GNP) and its gross domestic product (GDP). Net foreign factor income (NFFI) is the difference between a nation’s gross national product (GNP) and gross domestic product (GDP). NFFI is generally not substantial in most nations since payments earned by citizens and those paid to foreigners more or less offset each other. In mathematical terms: N F F I \= G N P − G D P G N P \= gross national product G D P \= gross domestic product \\begin{aligned}&NFFI\\ =\\ GNP\\ - \\ GDP\\\\&GNP=\\text{gross national product}\\\\&GDP=\\text{gross domestic product}\\end{aligned} NFFI \= GNP − GDPGNP\=gross Many economists have questioned how meaningful GNP or GDP is as a measure of a nation's economic well-being since they do not count most unpaid work while counting economic activity that is unproductive or destructive. Several economists still criticize GDP, specifically for providing a somewhat misleading picture of an economy's true health and the well-being of its citizens. In making the switch, the Bureau of Economic Analysis (BEA) said GDP provided a more straightforward comparison of other measures of economic activity in the United States and that it would be helpful to have a standard measure of economic output — most other countries at the time had already adopted GDP as their primary measure of production.

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What Is Net Foreign Factor Income (NFFI)?
Net foreign factor income (NFFI) is the difference between a nation’s gross national product (GNP) and its gross domestic product (GDP).



Understanding Net Foreign Factor Income (NFFI)
NFFI is the difference between the aggregate amount that a country’s citizens and companies earn abroad and the aggregate amount that foreign citizens and overseas companies earn in that country. In mathematical terms:
N F F I = G N P − G D P G N P = gross national product G D P = gross domestic product \begin{aligned}&NFFI\ =\ GNP\ - \ GDP\\&GNP=\text{gross national product}\\&GDP=\text{gross domestic product}\end{aligned} NFFI = GNP − GDPGNP=gross national productGDP=gross domestic product
The NFFI level is generally not substantial in most nations since payments earned by citizens and those paid to foreigners more or less offset each other. However, NFFI's impact may be significant in smaller nations with substantial foreign investment in relation to their economy and few assets overseas, since their GDP will be quite high compared to GNP.
GDP refers to all economic output that occurs domestically or within a nation’s boundaries, regardless of whether a local company or foreign entity owns production. GNP, on the other hand, measures the output from the citizens and companies of a particular nation, regardless of whether they are located within its boundaries or overseas. For example, if a Japanese company has a production facility in the U.S., its output will count toward U.S. GDP and Japan’s GNP.
GDP is the most widely accepted measure of economic output, having supplanted GNP around 1990. In making the switch, the Bureau of Economic Analysis (BEA) said GDP provided a more straightforward comparison of other measures of economic activity in the United States and that it would be helpful to have a standard measure of economic output — most other countries at the time had already adopted GDP as their primary measure of production.
Special Considerations
Many economists have questioned how meaningful GNP or GDP is as a measure of a nation's economic well-being since they do not count most unpaid work while counting economic activity that is unproductive or destructive.
Several economists still criticize GDP, specifically for providing a somewhat misleading picture of an economy's true health and the well-being of its citizens. This is because GDP does not take into account the profits earned in a nation by overseas companies that are remitted back to foreign investors. If these remitted profits are very large compared with earnings from the nation’s overseas citizens and assets, the NFFI figure will be negative, and GNP will be significantly below GDP.
NFFI may assume increasing importance in a globalized economy, as people and companies move across international borders more easily than they did in the past.
Related terms:
Aggregate Demand , Calculation, & Examples
Aggregate demand is the total amount of goods and services demanded in the economy at a given overall price level at a given time. read more
Bureau of Economic Analysis (BEA)
The Bureau of Economic Analysis (BEA), a division of the U.S. Department of Commerce, is responsible for the analysis and reporting of economic data. read more
Depression
An economic depression is a steep and sustained drop in economic activity featuring high unemployment and negative GDP growth. read more
What Is an Economist?
An economist is an expert who studies the relationship between a society's resources and its production or output, using a number of indicators to predict future trends. read more
Foreign Investment
Foreign investment involves capital flows from one nation to another in exchange for significant ownership stakes in domestic companies or other assets. read more
Gross Domestic Income (GDI)
Gross domestic income (GDI) is a measure of economic activity based on all the income earned while engaged in said economic activity. read more
Gross Domestic Product (GDP)
Gross domestic product (GDP) is the monetary value of all finished goods and services made within a country during a specific period. read more
Gross National Product (GNP)
Gross national product (GNP) is an economic statistic that includes GDP, plus any income earned by a residents from overseas investments, minus income earned within the domestic economy by foreign residents. read more
Gross National Income (GNI)
Gross National Income (GNI), an alternative to GDP as a way to measure and track a nation's wealth, is the total amount of money earned by a nation's people and businesses. read more