Q.What are the factors that determine National Income ?

The level of a country's national income depends on the quantity and quality of its factors of production and how efficiently they are used — natural resources, capital stock, labour force and its skill, technology, entrepreneurial ability and organisation, and a stable political and policy environment.

Meaning

National income is the money value of all final goods and services produced in a country in a year. Its magnitude varies from country to country and from year to year because the factors that generate production differ. These influencing factors are the determinants of national income.

Factors determining national income

• Quantity and quality of natural resources: A country rich in fertile land, minerals, water and favourable climate can produce more, raising national income.
• Stock and efficiency of capital: A larger and more productive stock of machines, tools and infrastructure increases output and hence national income.
• Size and quality of labour: A large, healthy, educated and skilled labour force raises productivity and national income.
• State of technology: Advanced techniques and better methods of production increase output from the same resources.
• Entrepreneurial ability and organisation: Efficient entrepreneurs who combine the factors well and take sound decisions raise production. …