Factor Income is the progression of income that is obtained from the Factors of Income--the general factors of production utilized in the creation of merchandise or service so as to make a monetary benefit. Components of creation incorporate land, work, and capital. Factor income on the utilization of land is called rent, income produced from work is called wages, and income created from capital is called benefit. The factor income of every single typical occupant of a nation is alluded to as the national income, while factor salary and current exchanges together are alluded to as private income.
Factor income is used to analyze macroeconomic situations and to find out the difference between Gross Domestic Product and Gross Domestic Income which is also the difference between the total value of the goods and services produced in a country and the net income of the citizens of the country. This helps the government understand the magnitude of income of the country's citizens and the citizens living abroad.
The applicability of the concept of Factor Income can be seen in developing countries where large portion of their Income is through foreign direct investment which creates a massive gap between Gross Domestic Product (GDP) and Gross National Income (GNI).