Explain What the Phrase "Net Factor Income to the Rest

question 62

Essay

Explain what the phrase "net factor income to the rest of the world" means and explain why this item is added when using the income approach to calculate GDP.

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Definitions:

Zero Coupon Bonds

Pay no coupons at all, but are offered at a substantial discount below their par value and hence provide capital appreciation rather than interest income. Sometimes referred to as “stripped bonds.”

Callable Bond

A bond that can be redeemed by the issuer before its maturity date at a specified call price.

Income Bonds

Bonds that pay interest only when the issuer has sufficient earnings, providing a variable income stream based on the issuer's profitability.

Yield to Maturity

The total return anticipated on a bond if it is held until the date it matures, reflecting interest and price appreciation.