Main economic factors

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:41

Economic factors are components that affect the production and distribution of we alth. They can lead both to economic growth and to its stagnation. There are different classifications, which include a different number of factors. The factors of economic growth and economic security are singled out separately.

Classification

The simplest classification considers only 3 fundamental factors: labor, land and financial.

Labor plays an important role in the economic life of society. It is determined by the total labor force and the degree of qualification of workers. With the increase in the share of high-tech industries and management systems, qualifications are becoming increasingly important. The quality of products and the efficiency of process control depend on it.

Land can be used for growing crops, mining, building businesses and homes.

Capital is understood not onlyfinancial resources, but also material objects created by man, various buildings, infrastructure.

An additional economic factor in this classification is information. The accumulated knowledge is important for the continued progress of technology and therefore directly affects the economy. In recent decades, the importance of this factor is especially high.

According to another classification, economic factors are:

Interest rate.
Inflation rate.
The state of the financial market.
The structure of consumption and its changes.
Demand indicators.
Trade balance.
Financial and credit policy.
Stock indices.
The state of the world and regional economies in various countries.
Dynamics of labor productivity and its level.

The degree and nature of the influence of economic factors on the state of the economy depends on the specific country and the current situation.

Additional factors

Also, factors such as:

Meetings of trade representatives, representatives of central banks, raw material exporting countries.
Major economic forums (eg Davos Forum, G20 meetings, etc.).
Forecasts of various indicators, indices and trends in the economy from competent organizations.
Various speculations.
Changes in neighboring markets.
Actions of banks.
Political decisions.

The following economic factors have the greatest influence on the development of the national economy:

Changes in gross domestic product (GDP) affect the average income level, employment rate, wages and social benefits, loan rates and the pace of development of the country as a whole.
Inflation rate. Inflation largely determines the value of interest rates on loans, the distribution of demand between different consumer goods, the volume of money supply, the cost of goods and resources and its dynamics.
Changes in the exchange rate of the national currency can affect pricing and the structure of exports and imports of a particular country. Companies that have trade ties with other countries depend on it the most.

Political factors

They have a big impact on the state of the economy. Legislative regulation changes the balance of supply and demand, affects the level of prices for certain types of products, and can set the general vector for the development of the state economy. Political impact can manifest itself at the international level (sanctions, global agreements, etc.) or within the state (excises, taxes, subsidies, distribution of capital between industries, etc.).

Technology advancement

The introduction of technological innovations in the production of products can make them better, cheaper and more competitive both in the regional and global markets. Until recently in the centertechnological progress were technical innovations for domestic use: computers, mobile phones, cameras, etc. Now this center has shifted to the energy and automotive industries.

In recent years, the development and implementation of new technologies has made it possible to significantly reduce the cost of energy production, and electric vehicles are no longer a luxury item, while their technical performance has grown significantly. According to various forecasts, this will lead to a radical change in the energy market in the coming decades, if not years. As a result, foreign exchange inflows to oil-producing countries such as Russia and Venezuela could fall sharply.

Geographic factors

These factors are one of the bases on which the economy is built. Each country, due to its geographical location, has a certain set of conditions and resources. Russia's position in this regard is very advantageous, despite the harsh climatic conditions: our country has large reserves of mineral raw materials, including oil, gas, diamonds, and non-ferrous metal ores. Russia is also rich in forests and has many opportunities to maintain and develop agriculture.

Social and demographic factors

The demographic situation and its dynamics have a significant impact on the economic development of the regions. With a lack of population size and density, the opportunities for economic growth are limited, which is associated with a shortage of labor resources and a large proportion of older age groups in the total population. In countrieswith a high population density, where its rapid growth is also observed (India, China), the total GDP is growing rapidly. This is due to the fact that more people of working age are able to produce more products. However, such growth will not necessarily be good for the country and its people.

The well-being of the population affects purchasing power, so the higher the average income per capita, the faster the economy can develop. The main growth driver is the middle class in terms of income, while a large gap between the incomes of different people and the absence of a middle class leads to a decrease in demand for many types of products.

Factors of economic development

Factors influencing economic growth were studied on the example of states with rapidly growing economies (China and some other Asian countries). Among them are the main and secondary factors. The main factors of economic growth were recognized: human capital, material capital and technology development.

Main drivers of economic growth

Human capital is determined by the number of employees, their qualifications, ability to learn, discipline, degree of motivation to work. An important role here is played by education, the average level of which determines the productivity and quality of labor.

Material capital is cash, various equipment, housing stock. As economic growthits size increases. The more plants and factories, the more products can be produced per unit of time. Thus, as the means of production accumulate, the opportunities for economic growth increase.

Scientific and technological progress allows us to produce better products and in greater quantities. It includes the accumulation of new knowledge, technologies, modern machinery and equipment. The engine of progress can also be an increase in the energy efficiency of production. However, the excessive growth of this indicator slows down the development of the economy, as it is often not economically profitable. This is especially true under the pressure of tightening standards for the emission of pollutants.

The possession of a variety of natural resources can be one of the factors conducive to economic growth. The United States is an example of such a relationship. However, in reality this factor is not always decisive. Japan has a small amount of land and resources, but has achieved great results in economic development. China has little oil and gas, but the country is developing dynamically. At the same time, Russia has almost all the necessary resources for successful growth, but has clearly not succeeded in economic development.

Additional economic growth factors

Fight against monopolies.
Efficient operation of the banking system.
Correcttax policy.
Diversifying production and exports.
Rational government regulation of the economy.
Stimulating domestic demand.
Decrease in money supply.
Reduce government spending.
Reducing dependence on raw materials.
Bet on the development of modern technologies.
Development of agriculture.
Decreasing the share of the poor and the very rich, increasing the share of the middle class.
Reducing the gap in the level of economic development of different regions.
Fight against the shadow economy.
Combating the outflow of capital and professional staff.