Major economic factors


Economic factors are components that affect the production and distribution of material goods. They can lead both to economic growth and to its stagnation. There are different classifications, which include a different number of factors. Separately, there are factors of economic growth and economic security.


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, qualification is becoming increasingly important. It affects the quality of products and process control efficiency.


Land can be used for growing crops, mining, building enterprises and residential buildings.

Under the capital are understood not only financial assets, but also material objects created by man, various buildings, infrastructure.

An additional economic factor in this classification is information. Accumulated knowledge is important for the continuation of the progress of technology and therefore directly affect the economy. In recent decades, the value of this factor is especially large.


According to another classification, economic factors are:

  • Interest rate.
  • Inflation rate.
  • The state of the financial market.
  • Consumption structure and its changes.
  • Indicators of demand.
  • Trade balance.
  • Financial and credit policy.
  • Stock indices.
  • The state of the global and regional economy in various countries.
  • The 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 current situation.

Additional factors

Also on the situation in the economy can influence such factors as:

  • Meetings of sales representatives, representatives of central banks, countries-exporters of raw materials.
  • Major economic forums (for example, the Davos forum, the G-20 meetings, etc.).
  • Forecasts of various indicators, indices and trends in the economy from the competent organizations.
  • Various speculations.
  • Changes in neighboring markets.
  • The actions of banks.
  • Political decisions.

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

  • Changes in gross domestic product (GDP) affect the average level of income, the level of employment, wages and social benefits, loan rates and the development of the country as a whole.
  • The size of inflation. Inflation largely determines the amount of interest rates on loans, the distribution of demand among various consumer goods, the volume of money supply, the cost of goods and resources and its dynamics.
  • A change in the value of a national currency may affect the pricing and structure of exports and imports of a particular country. Most of it depends on companies that have trade relations with other countries.


Political factors

They have a great influence on the state of the economy. Legislative regulation changes the balance of supply and demand, affects the price level for certain types of products, can set the overall vector of development of the state economy. Political influence can manifest itself at the international level (sanctions, global agreements, etc.) or within the state (excise taxes, taxes, subsidies, the distribution of capital among industries, etc.).

Technology development

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

In recent years, the development and introduction of new technologies has significantly reduced the cost of energy production, and electric-powered vehicles are no longer a luxury item, while their technical indicators have increased significantly. According to various forecasts, this will lead to a radical change in the energy market in the coming decades, and even years. As a result, the inflow of foreign currency to oil-producing countries such as Russia and Venezuela may sharply decline.

Geographical factors

These factors are one of the bases on which the economy is built. Each country, due to its geographic location, has a certain set of conditions and resources. The position of Russia in this regard is very advantageous, despite the harsh climatic conditions: in our country there are large reserves of mineral raw materials, including oil, gas, diamonds, non-ferrous metal ores. Russia is also rich in forests and has many opportunities for the maintenance and development of 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, opportunities for economic growth are limited, which is associated with a shortage of labor resources and a large proportion of representatives of older age groups in the total population. In countries with a high population density, where there is also a rapid growth (India, China), aggregate GDP is increasing rapidly. This is due to the fact that a larger number of people of working age are capable of producing a greater amount of products. However, such growth will not necessarily be favorable for the country and the people living in it.

The welfare of the population affects purchasing power, so the higher the average per capita income, the faster the economy can develop. The main driver of growth is the middle class in income, whereas 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 affecting economic growth were studied on the example of states with a fast-growing economy (China and some other Asian countries). Among them distinguish the main and minor factors. The main factors of economic growth were recognized: human capital, tangible capital and technology development.


The main factors of economic growth

Human capital is determined by the number of employees, their qualifications, ability to learn, discipline, degree of motivation to work. Education plays a major role here, on the average level of which productivity and quality of labor depends.

Material capital is cash, various equipment, housing stock. With economic growth, its size increases. The more plants and factories, the greater the amount of products can be produced per unit of time. Thus, with the accumulation of the means of production, the possibilities for economic growth increase.


Scientific and technical progress allows to produce higher quality products in larger quantities. It includes the accumulation of new knowledge, technologies, modern machines and equipment. Improvement of energy efficiency of production can also become the engine of progress. However, excessive growth of this indicator slows down the development of the economy, since it is often not economically profitable. This is especially happening under the pressure of tightening standards to the emission of pollutants.


Possessing a variety of natural resources can be one of the factors conducive to economic growth. An example of such a connection is the United States. However, in fact, 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 it has clearly not succeeded in economic development.


Additional factors of economic growth

  • The fight against monopolies.
  • Effective work of the banking system.
  • Correct tax policy.
  • Diversification of production and export.
  • Rational government regulation of the economy.
  • Stimulating domestic demand.
  • Reducing the issue of money.
  • Reduced government spending.
  • Decrease in raw dependence.
  • Bet on the development of modern technology.
  • The development of agriculture.
  • Reducing the proportion of poor and very rich, increasing the proportion of the middle class.
  • Reducing the gap in the level of economic development of different regions.
  • The fight against the shadow economy.
  • The fight against capital outflows and professional staff.

Many of these factors are also factors of economic security.

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