Which of the following are true about national income and related aggregates?

(A) National income includes factor income earned from abroad but does not include factor income paid abroad.

(B) Domestic income does not include factor income earned from abroad but includes factor income paid to abroad

(C) Domestic income include both factor income earned from abroad and factor income paid to abroad

(D) National income can never be smaller than domestic Income.

Choose the correct answer from the options given below:

Option 1 -> (A) and (B) only - Both statements correctly distinguish between National Income and Domestic Income concepts.

Option 2 -> (A) and (C) only - Incorrect because statement (C) is false; domestic income does not include factor income earned from abroad.

Option 3 -> (A), (C) and (D) only - Incorrect because both (C) and (D) are false statements.

Option 4 -> (B) and (D) only - Incorrect because statement (D) is false; national income can be smaller than domestic income when net factor income from abroad is negative.

Hence, Option 1: (A) and (B) only -> Statement (A) is correct: National Income = Domestic Income + Net Factor Income from Abroad (NFIA), where NFIA = Factor income earned from abroad - Factor income paid abroad. Thus, NI includes income earned from abroad but subtracts (excludes) income paid abroad. Statement (B) is correct: Domestic Income represents production within domestic territory, which includes income earned by non-residents working domestically (factor income paid abroad) but excludes income earned by residents working abroad. Statement (C) is false because domestic income does not include factor income earned from abroad. Statement (D) is false because when NFIA is negative (more factor income paid than earned), National Income becomes smaller than Domestic Income. -> correct