Factors determining national income. Major Factors Determining the Distribution of the National Income in a Centrally Planned Economy 2019-02-07

National Income Determination

The quality of goods may be falling despite the increase in their volume. 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. But during the short period the productive capacity does not change. Human resources :- National income also depends upon the human resources. A country where the government through its polices like taxation, monetary policy favors production, the level of national income is high but a country where the political will is poor and the policies are un favorable national income is low. This is the money value of all goods and services produced or income earned by the nationals of a country living within the country in a specific period of time and those living outside the country in a given period of time.

national income determination

The size of National Income is not same and uniform in all the countries. The economy is closed with no government or foreign interference. The developing countries are obsessed by the desire to make rapid progress in technology so as to catch up with the present-day developed countries. This is done on the assumption that in any year, the entrepreneurs intend to invest a certain amount of money. National security beginswith the individual being safe, and achieving a balance of law andintent is troublesome in these times of terrorists and changewithin countries.

national income determination

But in developing countries, the rate of saving is low because income of the people is low and that they are living at the level of subsistence. An important characteristic of economic growth is that it is never uniform or same in all sectors of an economy For example, in a particular year, the telecommunication sector of a country has marked a significant contribution in economic growth whereas the mining sector has not performed well as far as the economic growth of the country- is concerned. Viewed thus, technology in the present stage of economic development is an indispensable factor of produc­tion. But there is no guarantee that investment demand will exactly be equal to savings. Political Stability A stable economic and political system helps the allocation of resources. This amount must equal the value of everything produced. The factors determining growth in this period have been divided into two groups.

5 Factors for Determining the Size of National Income

That is, we assume that investment does not change with income. Entrepreneurial skill, that is, the ability to make decisions, calls for sound judgment and some courage. Social factors involve customs, traditions, values and beliefs, which contribute to the growth of an economy to a considerable extent. Keyenes theorized the three reasons people demand money to hold or save. Because the propensity to consume depends on the tastes and needs of the people and these do not change in the short run. It means national income is unequally distributed among people.

What are the factors that determine country's national income

The importance of foreign capital is reinforced by the need of a developing country for foreign exchange to buy imports. Furthermore, developing countries suffer not only from a shortage of savings but also from a lack of technical know-how, managerial ability, etc. For example, the social attitude towards women is important in this respect. This would increase the national income. This in large part explains the low level of saving in the poor, underdeveloped countries. The United States of America, now the richest country in the world, borrowed heavily in the nineteenth century, and has now emerged as the major lender country of the twentieth century which is assisting the poor countries in their attempts to bring about economic growth. Total income depends on total employment which depends on effective demand which in turn depends on consumption expenditure and investment expenditure.

Factors that Determine Economic Growth and Development of a Country

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. But what has been true of U. Technical progress manifests itself in the change in production function. Subsidies are monetary assistance given by government to firms for keeping market prices below the fac … tor cost. The production is adversely affected by thee political unrest. The conduciveness of the country for its citizens to exercise freedom of expression and speech and the election system. Apart from other factors, the capital formation in a country is determined by the extent of technical know-how and technology of production.

What are the factors that determine the national income of a country?

The availability of this skill will affect the use of resources and hence the size of the national income. It has now been realised that foreign investment will not only supplement domestic saving and thereby raise the rate of investment, bring better technology and managerial know-how but will also ease the problem of foreign exchange. The quantity and quality of capital, skills and other factors required for production is directly dependent on the efficiency of the technique of production being used. 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. Technology This factor is more important for nations with little natural resources. However, such a growth is better than the stagnation of an economy.

3 Important factors determining National Income

How has Japan done this miracle? A country with many entrepreneurs who are willing to take risks and invest in a range of productive activities has a high level of national income compared to a country where there are very few entrepreneurs. Thus, the lower the per capita income, the more difficult it is to forgo current consumption. If your neighbours are rich, you will have easier access to money and technology, and emmigration will balance your economy as well. Debt, infrastructure, taxes, grants, and even border controls are related to politics, and greatly influence the economy. The boundary is usually defined by geography or citizenship, and it is also defined as the total income of the nation and also restrict the goods and services that are counted. Government action or political will.

6 Factors Determines National Income Of A Country

As, according to Schumpeter, innovations occur in spurts rather than in a smooth flow, economic progress is not a smooth and an uninterrupted process. These sectors generate factor incomes. Besides, through increase in efficiency capital-output ratio has been estimated to decline to 3. The technological change may operate upon the production function through improvements of various sorts such as superior equipment, an improved material, and superior organisational efficiency. So a simple meas­ure of the technical progress would be the comparison of the position of production function at two points of time. Japan imports many of natural resources such as mineral oil it requires for production of manu­factured goods.