- Courses
-
Importance of English in UPSC Civil Services Mains Exam Nouns How to Write Correct English Spoken English Types of Sentences What is a Clause How to Memorize Vocabulary How to Improve your Spelling Words Usage Proverbs
- Demo class
Rameshwar's IAS Knowledge Store
Blinking feature using CSS Current Economy
- Contact
Determinants of National Income
Determinants of National Income
Tags: Gig Economy Economy WTO WTO Public Stockholding MSP Economic Growth Masala Bond Environmental Performance Index Forecast of Economic Growth Functions of the Finance Commission
The total value of services and goods which are produced in a nation during a solitary financial year is known as the National Income. The five factors that determine the size of national income will be highlighted in the following points.
1. Natural and Human Resources - A nation's national income is likely influenced most by the quantity and quality of its resources. Examples include mineral deposits that can be easily worked, ready sources of power, and fertile soil; a favorable climate, rivers that are navigable, etc. will have a positive impact on a nation's capacity for production. From basic hand tools to the most recent forms of industrial machinery, capital equipment can be found. Typically, an increase in capital equipment investment is linked to an increase in product output. Using machinery instead of just a pick and shovel, a miner, for instance, can extract more mineral resources from the ground. Subsequently, the viability with which regular and HR are utilized depends generally on the capital hardware accessible. The age distribution of the population and social attitudes determine the size of the working population. For instance, the social mentality towards ladies is significant in this regard. Many women's talents may be wasted if the community decides that "a woman's place is in the home. "The people's innate intelligence and the skills they acquire through education and training will both contribute to the quality of the workforce. The capacity to make decisions, or entrepreneurial skill, necessitates sound judgment and bravery. The utilization of resources and, as a result, the size of the national income will be affected by the skill's availability.
2. Technical Knowledge - New approaches to resource utilization and production may boost product and service output. A nation's standard of living is likely to be higher in a community that is eager to test out novel concepts or inventions in business and industry.
3. Political Stability -The expansion of business activities is dependent on political stability. Because they add to the usual risks associated with business, war and internal revolution hinder production. As a result, production and confidence are boosted when there is peace and a stable government.
4. Terms of Trade -All countries that participate in trade benefit, but a country's benefit will vary depending on changes in the prices at which it sells its exports and imports.If the prices of imported goods are lower than those of exported goods, favorable terms of trade exist. This means that for the same amount of exports, more imports can be obtained. As a result, more products are available and national income rises.
5. Foreign Investment -A country with a net income from foreign investment can get goods and services from countries with debts without having to give them back. As a result, the nation with the better net return from foreign investment will have a higher national income if the two nations have the same Gross Domestic Product.