Q.What are the factors that determine National Income?

The level of national income depends on the quantity and quality of a country's resources — natural resources, capital, labour, technology, organisation — and on how fully and efficiently they are used, together with political stability and sound economic policy.

Meaning

National income is the money value of all final goods and services produced by a country in a year. The larger and more productive the resources used, the greater the national income. The following factors determine its size.

Factors Determining National Income

1. Natural resources — the quantity, quality and variety of land, minerals, forests, water and climate. A country rich in natural resources can produce more and earn a higher national income.
2. Capital — the stock of machines, tools, buildings and infrastructure. A larger and better stock of capital raises productivity and output.
3. Human resources (labour) — the size, education, skill, health and efficiency of the working population. Skilled and healthy workers raise production.
4. Technology and techniques of production — advanced technology and modern methods increase output from the same resources.
5. Organisation and enterprise — efficient organisation of the factors of production by able entrepreneurs raises productivity and income.
6. Full and efficient utilisation of resources — if resources lie idle or are wasted, national income is low; full employment and efficient use raise it. …