Factors that determine the level of national income in an economy.
- The level of investment both domestically and externally. The higher the level of investment, the higher the level of national income but a low level of investment discourages the production of goods and services hence low levels of national income.
- The level of exploitation and utilization of the available natural resources. The higher the level of utilization of natural resources like minerals and water resources in the economy, the higher the level of national income and the lower the level of utilization of natural resources, the lower the level of national income.
- The size and quality of the labour force (working population). Presence of a big and skilled labour force increases production of goods of services which leads to an increase in national income. On the other hand, a small-unskilled labour force discourages production hence low levels of income
- Level of capital stock. Availability of capital in form of machinery and equipment increases the level of output and national income while presence of limited capital stock limits production hence low level of National Income.
- The level of technological progress. Use of better and improved technology increases production at reduced average costs hence giving a bigger size of national income. On the other hand, uses of poor production techniques reduce output hence low level of national income.
- Degree of political stability. Political stability encourages investment and growth of national income while political instability leads to break down in production by discouraging investment hence a small size of national income.
- Market size within and outside the country. The large market encourages investors which lead to the production of more goods and services hence increasing national income. But a small market discourages investment and production hence low level of national income.
- The level of monetization of the economy. The higher the level of monetization of the economy, the higher the level of national income. But a large subsistence sector discourages production and exchange hence low levels of income.
- Level of specialization in production. The higher the level of specialization in the economy, the higher the level of national income and the lower the level of specialization, the lower the level of national income
- The level of entrepreneurial ability. Presence of individuals who can organize and mobilize other factors of production leads to an increase in production hence an increase in national income and absence of entrepreneurial skills discourages production hence low levels of national income.
- Degree of economic stability. A country which is economically stable in form of stable prices of goods and services encourages investments hence increase in the level of national income. But existence of high levels of inflation discourages investments hence low levels of national income.
- Level of saving
- Land tenure system
CATEGORIES Economics
TAGS Dr. Bbosa Science
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