Theories of Employment and Income Additional Practice Test

12th Standard Economics — Theories of Employment and Income: Additional Online Practice Test

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According to Abba P. Lerner, what defines the level of full employment?

A.When involuntary unemployment is completely absent B.When any further increase in spending results in an inflationary spiral of wages and prices C.When every able-bodied person is employed at the prevailing wage rate D.When the marginal productivity of labour becomes zero

Which type of unemployment occurs due to massive and deep-rooted changes in the economic structure of a society, such as a shift in demand from cameras to mobile phones?

A.Frictional Unemployment B.Technical Unemployment C.Structural Unemployment D.Cyclical Unemployment

In an economy, if some workers can be withdrawn from a production activity without reducing the total output, what is the marginal productivity of these workers?

A.Equal to the average product B.Positive and increasing C.Zero, negative, or less than normal D.Equal to the wage rate

Which of the following is a key assumption of the Classical Theory of Employment regarding market structure and government involvement?

A.Monopolistic competition with heavy state regulation B.Perfect competition in product and labour markets with a laissez-faire economy C.Oligopolistic market with a centralized planning authority D.Price rigidity with active state intervention

J.B. Say's law of markets states that aggregate supply must be equal to aggregate demand in which of the following senses?

A.Ex-post sense as an accounting identity B.Ex-ante sense where planned production equals planned purchase C.Only in the short-run equilibrium period D.When money serves as a store of value

Why did J.M. Keynes reject the classical view that money is neutral and acts only as a medium of exchange?

A.Because money supply is completely controlled by commercial banks B.Because individuals hold money for unforeseen contingencies and future business activities C.Because the rate of interest is determined solely by saving and investment D.Because money has no intrinsic value in a capitalist economy

What is the starting point of J.M. Keynes's theory of employment and income?

A.Say's Law of Markets B.Wage-Price flexibility C.The principle of effective demand D.Interest rate flexibility

According to Keynesian theory, effective demand is determined by the intersection of which two functions?

A.Marginal propensity to consume and marginal propensity to save B.Saving function and investment function C.Aggregate demand function and aggregate supply function D.Liquidity preference and money supply

Which of the following is NOT a component of the Aggregate Supply Function in the Keynesian model?

A.Desired private savings B.Desired private investment expenditure C.Net tax payments D.Personal transfer payments to foreigners

Q10

In the Keynesian theory of employment, when the full employment level is reached, the aggregate supply curve becomes:

A.Perfectly elastic B.Perfectly inelastic C.Downward sloping D.Positively sloped at a 45-degree angle

Q11

In J.M. Keynes's system, what does the difference between the equilibrium level of employment and the full employment level represent?

A.Hyperinflationary gap B.Voluntary unemployment C.The level of involuntary unemployment D.Frictional unemployment

Q12

While classical economists advocate a balanced budget, what is the Keynesian view on budgeting?

A.The budget must always show a surplus B.Budgeting should be adjusted to the requirements of the economy C.The budget must remain completely unregulated by the state D.Capital expenditure should never be included in the budget

Q13

According to classical theory, the rate of interest is determined by saving and investment. How is it determined in Keynesian theory?

A.By the interaction of aggregate demand and aggregate supply B.By the level of national income and consumption C.By the demand for and supply of money D.By the marginal efficiency of capital alone

Q14

How is the rate of interest characterized in Classical theory compared to Keynesian theory?

A.Classical theory views it as a flow, while Keynesian theory views it as a stock B.Classical theory views it as a stock, while Keynesian theory views it as a flow C.Both theories treat it as a static flow variable D.Both theories treat it as a dynamic stock variable

Q15

According to Keynesianism, saving is considered a vice because it can reduce aggregate demand. What is the classical view of saving?

A.Saving is an economic leak that always causes depression B.Saving is a social virtue that leads to investment and growth C.Saving must be discouraged through heavy state taxation D.Saving is completely neutral and does not affect the rate of interest

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About this Theories of Employment and Income test

This free online practice test covers Theories of Employment and Income from the 12th Standard Economics (Samacheer Kalvi) syllabus. Choose the number of questions and an optional time limit, then answer and submit — everything is checked in your browser, with the correct answers and a worked explanation shown at the end. For the full solutions to every question in this set, see the solved MCQs page.

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