Factors Determining National Income

1. Quantity of goods and services produced by the country. Higher the quantity of production, higher shall be the national income.

2. Quality of products and services produced in the country will also determine the national income of a country.

3. Innovation of more technical skills will improve the productivity which will reflect on national income of the country.

4. Political stability strengthens the national income of an economy.

Difficulties In The Calculation Of National Income:

1. Any income earned abroad have to be included
2. To avoid double counting, value added method should be considered
3. Services rendered free of charges are not to be included
4. Capital gains, transfer payments are not to be included
5. Changes in price level will also affect the calculation
6. Value of military services will not be taken into consideration.

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