Chapter 3: Theories of Employment and Income — Online MCQ Test
ECONOMICS · CLASS 12th · Tamil Nadu State Board
Practice Chapter 3: Theories of Employment and Income with a free chapter-wise online MCQ test.
This chapter covers: Contrasts the classical view of full employment as a natural market outcome with the Keynesian theory of effective demand which argues that employment and income levels are determi....
AI-generated questions from basic to board-exam level, with instant results and explanations.
Chapter 3: Theories of Employment and Income — Important Questions & Answers
According to the Classical theory of employment, the economy automatically tends to achieve:
- A. Under-employment equilibrium
- B. Full employment equilibrium
- C. Persistent inflation
- D. Falling aggregate demand
Answer: B. Full employment equilibrium
Classical economists believed that flexible wages and prices ensure the economy moves toward full employment in the long run.
Classical economists believed that flexible wages and prices ensure the economy moves toward full employment in the long run.
In Keynesian economics, employment is mainly determined by:
- A. Aggregate demand
- B. Population growth
- C. Money supply alone
- D. Natural resources only
Answer: A. Aggregate demand
Keynes argued that the level of employment depends on effective demand, which is reflected in aggregate demand.
Keynes argued that the level of employment depends on effective demand, which is reflected in aggregate demand.
If consumption and investment spending increase in the economy, Keynesian theory predicts that:
- A. Employment will increase
- B. Employment will definitely fall
- C. Savings will disappear completely
- D. Prices will never change
Answer: A. Employment will increase
Higher aggregate demand raises output, which leads firms to hire more workers and increase employment.
Higher aggregate demand raises output, which leads firms to hire more workers and increase employment.
Which statement best compares Classical and Keynesian views?
- A. Classical theory supports government intervention; Keynesian theory rejects it
- B. Classical theory believes markets may not clear automatically; Keynesian theory believes they always do
- C. Classical theory emphasizes supply-side adjustment; Keynesian theory emphasizes demand-side determination
- D. Both theories deny the role of employment in national income
Answer: C. Classical theory emphasizes supply-side adjustment; Keynesian theory emphasizes demand-side determination
Classical theory focuses on market adjustment through flexible wages and prices, while Keynesian theory stresses aggregate demand as the key determinant of output and employment.
Classical theory focuses on market adjustment through flexible wages and prices, while Keynesian theory stresses aggregate demand as the key determinant of output and employment.
Which of the following is the correct sequence in the Keynesian income-employment determination process?
- A. Employment → Output → Income → Aggregate demand
- B. Aggregate demand → Output → Income → Employment
- C. Income → Aggregate supply → Prices → Trade
- D. Wages → Savings → Imports → Employment
Answer: B. Aggregate demand → Output → Income → Employment
In Keynesian theory, aggregate demand determines output, which generates income and leads to corresponding employment levels.
In Keynesian theory, aggregate demand determines output, which generates income and leads to corresponding employment levels.