3. Factors Affecting National Income

Several factors affect the national income of a country. Some of them have been listed below:

1. Factors of Production: Normally, the more efficient and richer the resources, higher will be the level of National Income or GNP.

2. Land: Resources like coal, iron and timber are essential for heavy industries so that they must be available and accessible. In other words, the geographical location of these natural resources affects the level of GNP.

3. Capital: Capital is generally determined by investment. Investment in turn depends on other factors like profitability, political stability etc.

4. Labour and Entrepreneur: The quality or productivity of human resources is more important than quantity. Manpower planning and education affect the productivity and production capacity of an economy.

5. Technology: This factor is more important for nations with fewer natural resources. The development in technology is affected by the level of invention and innovation in production.

6. Government: Government can help to provide a favorable business environment for investment. It provides law and order, regulations.

7. Political Stability: A stable economy and political system helps in appropriate allocation of resources. Wars, strikes and social unrests will discourage investment and business activities.