Theories of Employment and Income Online Test 12th Economics Lesson 3 Questions in English

1. Who among the following defines full employment as the absence of involuntary unemployment?

2. Every able-bodied person who is willing to work at the prevailing wage rate is employed called ___

Which among the following statement is correct

1. The economic history has shown many countries facing economic problems. Out of these problems, unemployment is the most vexing. Both classical economists and Keynes have explained the relationship between employment and income.
2. Full employment refers to a situation in which every able-bodied person who is willing to work at the prevailing wage rate, is employed. In other words, full employment means that persons who are willing to work and able to work must have employment or a job.
3. Friedrich Hayek defines full employment as “that level of employment at which any further increase in spending would result in an inflationary spiral of wages and prices”. Not every economy in the world aims at attaining the level of full employment equilibrium where all its available resources are not fully and efficiently employed to achieve maximun level of output.

Which among the following statement is correct

1. India’s rural economy has both more underemployment and less unemployment. The major feature of rural underemployment is the existence of underemployment in the form of disguised underemployment and seasonal underemployment.
2. In India, frictional, structural and open unemployment exist in urban areas. Due to urbanization, a large number of people move from rural areas to urban areas. This migration from rural to urban areas increases the size of labour force in urban areas and adds to the already unemployed labour force.

5. In reality, the concept of full employment generally refers to full employment of what?

7. Which unemployment arises due to imbalance between supply of labour and demand for labour?

8. The lack of employable skills, mass student turnout and preference for white collar jobs are highly responsible for which unemployment in India?

9. Modern technology being capital intensive requires less labourers and contributes to which unemployment?

6. Which among the following is not the type of unemployment?

8. The lack of employable skills, mass student turnout and preference for white collar jobs are highly responsible for which unemployment in India?

11. Which among the following unemployment occurs when more people are there than what is actually required?

12. Which unemployment is also known as Temporary unemployment?

Which among the following statement is correct

1. Cyclic unemployment exists during the downturn phase of trade cycle in the economy. In a business cycle during the period of recession and depression, income and output fall leading to widespread unemployment. It is caused by deficiency of effective demand. Cyclical unemployment can be cured by public investment or expansionary monetary policy.
2. Seasonal Unemployment occurs during certain seasons of the year. In agriculture and agro based industries like sugar, production activities are carried out only in some seasons. These industries offer employment only during that season in a year. Therefore, people may remain unemployed during the off season. Seasonal unemployment happens from demand side also; for example, ice cream industry, holiday resorts etc.

14. Who among the following wrote the book “An Enquiry into the Nature and Causes of the Wealth of Nations’’?

15. Which among the following is the core of the classical theory of employment?

16. J.B. Say enunciated the proposition that which creates its own demand?

Which among the following is the assumption of the Say’s law of market?

1. A single buyer or seller of commodity or an input can affect price. People are not motivated by self-interest and self – interest can’t determines economic decisions. There will be a perfect competition in labour and product market.
2. The laissez faire policy is essential for an automatic and self-adjusting process of full employment equilibrium. Market forces determine everything right. There is wage-price flexibility. Money acts only as a medium of exchange.
3. Unutilized resources used until reaches full employment. No Government intervention automatic Price adjustment mechanism operated. There is no possibility for over production or unemployment. Interest rate flexibility leads is saving – Investment equality.

18. The statement that supply creates own demand or equivalently that the aggregate investment equals the aggregate saving always holds good in which sense?

Which among the following is not the Implication of say’s law?

1. There is more possibility for over production or unemployment. If there exist fully utilized resources in the economy, it is profitable to employ them up to the point of full employment. This is true under the condition that factors are willing to accept rewards on a par with their productivity.
2. As automatic price mechanism operates in the economy, there is no need for government intervention. (However, J.M. Keynes emphasized the role of the State). Interest flexibility brings about equality between saving and investment. Money performs only the medium of exchange function in the economy, as people will not hold idle money.

Which among the following is the Criticisms of Say’s Law?

1. According to Hayek, supply does not create its demand. It is not applicable where demand does not increase as much as production increases. Hayek regards full employment as a special case because there is over – employment in capitalist economies.
2. Automatic adjustment process will not remove unemployment. Unemployment can be removed by increase in the rate of investment. Money is not neutral. Individuals hold money for unforeseen contingencies while businessmen keep cash reserve for future activities.
3. Say’s law is based on the proposition that supply creates its own demand and there is no over production. Keynes said that over production is possible. The need for state intervention arises in the case of general over production and mass unemployment.

22. The classical economist believes that the market forces in which economy adjust themselves to attain equilibrium?

Which among the following statement is correct

1. Keynes’ theory was a general theory as it tried to explain all types of situations, i.e. not only equilibrium level of employment but also the concept of full employment as well as the possibility of underemployment.
2. Keynes theory of employment was based on the view of the long run. According to him, the factors of production such as capital goods, supply of labour, technology and efficiency of labour remains changing while determining the level of employment.

24. The starting point of Keynes theory of employment and income is the principle of what?

Which among the following statement is correct reading Effective demand

1. An increase in the aggregate effective demand would increase the level of employment. A decline in total effective demand would lead to unemployment. Therefore, total employment of a country can be determined with the help of total demand of a country.
2. According to the Keynes theory of employment, “Effective demand signifies the money spent on consumption of goods and services and on investment. The total expenditure is equal to the national income, which is equivalent to the national output”.
3. The relationship between employment and output of an economy depends upon the level of effective demand which is determined by the forces of aggregate supply and aggregate demand.

26. Which among the following is the correct equation of Effective Demand (ED)?

Which among the following statement is correct regarding Effective demand

1. Effective demand determines the level of employment in the economy. When effective demand increases, employment will increase. When effective demand decreases, the level employment will decline.
2. The effective demand will be completely determined by consumption. The consumption function depends upon income of the people and marginal propensity to consume. According to Keynes, if income increases, consumption will decrease but by less than the increase in income.
3. The rate of interest and marginal efficiency of capital determine the investment levels. Rate of interest depends on money supply and liquidity preference. Keynes has given importance to the concept of liquidity preference.

28. Which among the following is not the motives of Liquidity preference?

 Who among the following wrote the book “The General Theory of Employment, Interest and Money”?

29. Which is the amount of money which entrepreneurs expect to get by selling the output produced by the number of labourers employed?

30. Which among the following is not the components of Aggregated demand?

31. Which is the amount that households, firms, the governments and the foreign purchasers would like to spend on domestic output?

32. Which among the following express the Aggregate demand?

33. Which among the following refers to the value of total output of goods and services produced in an economy in a year?

Which among the following statement is correct regarding Aggregate Supply Function (ASF)

1. The aggregate supply refers to the required number of labourers and materials to produce the necessary output. Employers hire labourers, purchase various inputs and raw materials to produce goods. Thus, production involves cost.
2. If the revenue from the sale of output produced is less than the cost of production at a given level of employment and output, the entrepreneur would be encouraged to employ more labour and other inputs to produce more.
3. Aggregate supply price is the total amount of money that all entrepreneurs in an economy expect to receive from the sale of output produced by given number of labourers employed. The term ‘price’ refers to the amount of money received from the sale of output .

35. Which among the following is not the components of aggregate supply?

36. Which among the following express the Aggregate supply?

Which among the following statement is correct regarding aggregated supplly

1. The slope of the aggregate supply curve depends on the relation between the employment and productivity. The capital stock is often fixed and hence the law of diminishing marginal returns takes place as more workers are employed.
2. If prices are high and wages low, the producers will try to employ labourers. If prices are low and wages high, investment will be curtailed, output will fall and there will be a reduction in the productive capacity. Thus, aggregate supply is an important factor in determining the level of economic activity.

38. The basic concept used in Keynes Theory of Employment and Income is ___

39. In disguised unemployment, the marginal productivity of labour is ___

40. Keynes theory pursues to replace laissez faire by ____

41. Which two sectors is taken to understand the equilibrium between ADF and ASF under the Keynes theory of employment?

42. How many approaches are there to determination of the equilibrium level of income in Keynesian theory?

43. According to classical theory, rate of interest is a reward for ____

44. Which among the following point does not come under Keynesianism theory?

45. According to Classical theory, Rate of interest is determined by what?

46. According to Keynes’ Theory the equality between saving and investment is advanced through what?

47. According to Classical theory, rate of interest is what?

48. The expected rate of return over costs of a new capital good is called _____