National Income Accounting — Economics STD 12 Humanities & Commerce — Question

A factor payment is a payment made in return for Productive service rendered by the factors of production. For example, wages, rent, interest etc. Whereas a transfer payment is a payment received without rendering any productive service in return. For example, old-age pension, donation, grants etc.

• A factor payment is a 'productive payment' whereas a transfer payment is an 'unproductive payment'.
• A factor payment is included in National Income whereas a transfer payment is not included in it.