Factors determining national income. What are the factors that determine the national income of a country? 2019-01-08

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Factors which determine the volume of national income

factors determining national income

The techno­logical progress takes place through inventions and innovations. Chapter 1; heading: Brief history of economic accounts retrieved November 2009. The quality of the labour force will depend partly on the innate intelli­gence of the people and partly on the skills acquired through education and training. As a result of technological advance it becomes possible to produce more output with same resources or the same amount of product with less resource. In United States, for instance, increased used of mecha­nized power-driven farm equipment on land has greatly raised the agricultural productivity of land per hectare. Schumacher has recom­mended the use of intermediate technology or what is also known as appropriate technology by the developing countries like India. Aggregate demand involves concepts namely aggregate demand for consumer goods and aggregate demand for capital goods.


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Major Factors Determining the Distribution of the National Income in a Centrally Planned Economy

factors determining national income

At this level, Y is the real output, as shown by the intersection, point D, with the 45 o line. A country with 100k people will have to work 10 times more to match the income of a country of 1M people. National income considers the flow of output of commodities, the income and expenditures. Countries having plenty of natural resources enjoy good growth than countries with small amount of natural resources. By Intermediate or appropriate technology is meant the technology which is labour-intensive and yet highly productive so that with its use enough employment opportunities are created along with more production.

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5 Factors for Determining the Size of National Income

factors determining national income

Thus, the effectiveness with which natural and human resources are used depends to a large extent on the capital equipment available. Political Stability This is an essential prerequisite for maintaining production at the highest level. These determinants of economic growth affect 1 the rate of investment and 2 captia-output ratio. However, since an output of one industry may be used by another industry and become part of the output of that second industry, to avoid counting the item twice we use not the value output by each industry, but the value-added; that is, the difference between the value of what it puts out and what it takes in. Though the foreign companies send back profits earned, their investments in factories increase the rate of capital accumulation in the developing countries leading to a higher rate of economic growth and higher productivity of labour. For higher productivity the instruments of production have to be techno­logically more efficient and superior. If foreign assistance is not forthcoming in adequate quantity, then the developing countries will experience serious difficulties of balance of payments.


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National Income Determination

factors determining national income

Therefore, the human resources of a country should be adequate in number with required skills and abilities, so that economic growth can be achieved. But the question arises as to how the technological progress takes place. The availability of the skill will affect the use of resources and, hence, the size of the national income. Entrepreneurial skill, that is, the ability to make decisions, calls for sound judgment and some courage. High taxes reduce real income and low taxes lead to high real income. There are several ways to measure this Net output method, Net Product method, Value Addition etc.

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What Are The Factors Affecting National Income?

factors determining national income

When the cost of living is high real income is low and when the cost of living is low real income is high. The quantity and quality of land, the climate, the rainfall, etc. Total income depends on total employment which depends on effective demand which in turn depends on consumption expenditure and investment expenditure. Several factors are responsible for this. The only consequence of increased demand is that the price level will increase.

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Major Factors Determining the Distribution of the National Income in a Centrally Planned Economy

factors determining national income

But more generally technological advance re­sults in increasing the productivity or effectiveness with which natural resources, capital and labour are used and worked to produce goods. This means that a larger quantity of exports. When goods and services are readily available, real income is high but when goods and services are inconvenient hard and difficult to get the real income is low. The economy is closed with no government or foreign interference. The process of economic growth is a highly complex phenomenon and is influenced by numerous and varied factors such as economic, political, social and cultural factors. These stages are: i Traditional society; ii Preconditions for takeoff; iii Take-off into self-sustaining growth; iv Drive to maturity and iv Stage of high mass consumption.

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Factors that Determine Economic Growth and Development of a Country

factors determining national income

Speaking of the importance of education or human capital. Classical economists like Ricardo and J. And a higher rate of investment, in turn, is possible if rate of saving is high. In other words, equilibrium income falls when people want to save more. Productivity of worker depends upon the quantity and quality of capital tools with which the labourers work. The new inventions and innovations lead to new and more efficient techniques of produc­tion and new and better products. These concern the availability and accuracy of data or statistics.

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6 Factors Determines National Income Of A Country

factors determining national income

National income is The sum of the goods and services produced with the help of the natural resources and capital stock. Therefore, in the opinion of many economists, capital formation is the very core of economic development. Countries that have worked in the field of technological development grow rapidly as compared to countries that have less focus on technological development. It is because the introduction of superior or more efficient techniques require building up of new capital equipment which incorporates new technology. The quality of goods may be falling despite the increase in their volume. Labour is combined with capital to produce goods and services. The prosperity of any country depends upon the large size of national income.

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