Tag: unemployment and employment generation

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Multiple choice economics theories of distribution unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

According to Keynes, the equilibrium level of income is always determined corresponding to full employment level. 

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

False.
 The equilibrium level on income may be determined at a level less than full employment where the market is clear even in under utilization of resources , more than the full employment where market is clear even if resources are over utilized or equal to level of full employment. 
Multiple choice economics theories of distribution unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

 In determination of Equilibrium Level of Income by AD-AS approach, AD curve is represented by ____________.

  1. (C + S) curve

  2. (C + I) curve

  3. (S + I) curve

  4. (C +Y) curve
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Aggregate Demand refers to the desired level of expenditure in the economy during an accounting year. It is what people wish to spend on the purchase of goods and services during an accounting year.

The Ad curve in income determination analysis represents a two sector economy which only includes the expenditure made by the consumer sector and the producer sector.

Therefore, aggregate demand = consumption + investment = C + I.

Multiple choice economics theories of distribution unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

The two approaches to determination of the equilibrium level of income are:

  1. Aggregate demand-Aggregate supply approach

  2. Saving-Investment approach

  3. Demand-Supply approach

  4. Both A & B
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Two approaches are:

1) Aggregate demand-Aggregate supply approach-
An economy is in equilibrium when aggregate demand for goods and services is equal to aggregate supply during a period of time.

So, equilibrium is achieved when:

AD = AS … (1)

We know, AD is the sum total of Consumption (C) and Investment (I):

AD = C + I … (2)

Also, AS is the sum total of consumption (C) and saving (S):

AS = C + S … (3)

Substituting (2) and (3) in (1), we get:

C + S = C + I.....(4)

2)Saving-Investment approach 

According to this approach, the equilibrium level of income is determined at a level, when planned saving (S) is equal to planned investment (I).

from equation( 4)

 S = I

Multiple choice economics theories of distribution unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

When aggregate supply exceeds aggregate demand or when investment is less than savings, _____________ will decrease.

  1. savings

  2. price

  3. income

  4. all of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When aggregate supply is more than aggregate demand or when investment is less than savings, then the planned inventory rises above the desired level. To clear the unwanted increase in inventory, firms plan to reduce the production output till Aggregate demand becomes equal to Aggregate supply. Therefore, level of national income reduces to the level of aggregate demand in the economy.

Multiple choice economics theories of distribution unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

When aggregate demand exceeds aggregate supply or when investment is greater than savings, _____________ will increase.

  1. price

  2. income

  3. savings

  4. all of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When aggregate demand is more than aggregate supply or when investment is more than saving in the economy , then the planned inventory would fall below the desired level. To bring back the Inventory at the desired level, the producers will expand the output. Therefore, as a result of more output in the economy, the income will increase. 

Multiple choice economics theories of distribution unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

______________ propounded the Liquidity Preference Theory of Interest.

  1. Adam Smith

  2. Marshall

  3. Keynes

  4. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Liquidity Preference theory refers to the preference of the people to hold wealth in the form of liquid cash rather than in other non-liquid assets like bonds, securities, bills of exchange, land, building, gold etc. According to the liquidity preference theory of interest, interest rates on short-term securities are lower because investors are not sacrificing liquidity for greater time frames as in medium or longer-term securities. 

The theory was propounded by Keynes as a part of his Macro economic studies. 

Multiple choice economics theories of distribution unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

_______________ means the preference of the people to hold wealth in the form of liquid cash rather than in other non-liquid assets like bonds, securities, bills of exchange, land, building, gold etc.

  1. Demand preference

  2. Liquidity preference

  3. Supply preference

  4. Transaction preference
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Liquidity Preference theory refers to the preference of the people to hold wealth in the form of liquid cash rather than in other non-liquid assets like bonds, securities, land, building, gold etc. According to the liquidity preference theory of interest, interest rates on short-term securities are lower because investors are not sacrificing liquidity for greater time frames as in medium or longer-term securities.

Multiple choice economics income determination unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

Government expenditure is undertaken for ___________.

  1. consumption purpose

  2. investment purpose

  3. either A or B

  4. neither A nor B
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Government expenditure refers to the expenditure made by the government during the period of an accounting year which forms a part of the aggregate demand in the economy which is incurred either for consumption purpose like judiciary system or investment purpose like infrastructural development. 

Multiple choice economics income determination unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

Import and export are the two sides of ____________.

  1. market equilibrium

  2. international trade

  3. global currency valuations

  4. balance of payments
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Import and export are the two sides of international trade where import refers to purchasing of goods and services from international market in the country and export refers to selling goods and services in the international market.