Every Book Back multiple-choice question from Theories of Employment and Income (12th Standard Economics, Samacheer Kalvi) — each with the correct option highlighted and a clear, worked explanation. Free to read in English and Tamil.
Q1
If every able bodied person who is willing to work at the prevailing wage rate is employed called ________.
- A. Full employmentCorrect
- B. Under employment
- C. Unemployment
- D. Employment opportunity
Explanation. Full employment is a condition where all able-bodied individuals willing to work at current wages find jobs.
Q2
Structural unemployment is a feature in a ________.
- A. Static society
- B. Socialist society
- C. Dynamic societyCorrect
- D. Mixed economy
Explanation. Structural unemployment is a characteristic of a dynamic society experiencing massive structural changes, like technological shifts or variations in demand.
Q3
In disguised unemployment, the marginal productivity of labour is ________.
- A. ZeroCorrect
- B. One
- C. Two
- D. Positive
Explanation. In disguised unemployment, more workers are employed than needed, meaning additional laborers do not add to total output, resulting in zero marginal productivity.
Q4
The main concern of the Classical Economic Theory is ________.
- A. Under employment
- B. Economy is always in the state of equilibriumCorrect
- C. Demand creates its supply
- D. Imperfect competition
Explanation. Classical economic theory assumes the economy automatically self-adjusts to maintain a continuous state of full-employment equilibrium in the long run.
Q5
J.B. Say is a ________.
- A. Neo Classical Economist
- B. Classical EconomistCorrect
- C. Modern Economist
- D. New Economist
Explanation. Jean-Baptiste Say was a prominent classical economist from France, famous for Say's Law of Markets, which states supply creates its own demand.
Q6
According to Keynes, which type of unemployment prevails in a capitalist economy?
- A. Full employment
- B. Voluntary unemployment
- C. Involuntary unemployment
- D. Under employmentCorrect
Explanation. Keynes argued that capitalist economies typically operate at an underemployment equilibrium, where some resources and labor remain underutilized.
Q7
The core of the classical theory of employment is ________.
- A. Law of Diminishing Return
- B. Law of Demand
- C. Law of MarketsCorrect
- D. Law of Consumption
Explanation. Say's Law of Markets, stating that supply creates its own demand, represents the core foundation of classical employment theory.
Q8
Keynes attributes unemployment to ________.
- A. A lack of effective supply
- B. A lack of effective demandCorrect
- C. A lack of both
- D. None of the above
Explanation. Keynesian economic theory states that unemployment is primarily caused by a deficiency in effective demand, which limits production and hiring.
Q9
________ flexibility brings equality between saving and investment.
- A. Demand
- B. Supply
- C. Capital
- D. Rate of interestCorrect
Explanation. Classical theory asserts that flexibility in interest rates automatically balances savings and investments, maintaining equilibrium in the economy.
Q10
________ theory is a turning point in the development of modern economic theory.
- A. Keynes'Correct
- B. Say's
- C. Classical
- D. Employment
Explanation. Keynes's General Theory, published in 1936, challenged classical economic views and established modern macroeconomics, marking a significant turning point.
Q11
The basic concept used in Keynes Theory of Employment and Income is ________.
- A. Aggregate demand
- B. Aggregate supply
- C. Effective demandCorrect
- D. Marginal Propensity Consume
Explanation. The principle of effective demand serves as the foundational starting point for Keynes's theory of income and employment determination.
Q12
The component of aggregate demand is ________.
- A. Personal demand
- B. Government expenditureCorrect
- C. Only export
- D. Only import
Explanation. Government expenditure is one of the four major components of aggregate demand, along with consumption, investment, and net exports.
Q13
Aggregate supply is equal to ________.
- A. C + I + G
- B. C + S + G + (x-m)
- C. C + S + T + (x-m)
- D. C + S + T + RfCorrect
Explanation. Aggregate supply represents the total income generated in the economy, which comprises consumption, savings, taxes, and personal transfer payments to foreigners.
Q14
Keynes theory pursues to replace laissez faire by ________.
- A. No government intervention
- B. Maximum intervention
- C. State intervention in certain situationCorrect
- D. Private sector intervention
Explanation. Keynes advocated for state intervention under certain circumstances, such as depressions or mass unemployment, to replace absolute laissez-faire policies.
Q15
In Keynes theory of employment and income, ________ is the basic cause of economic depression.
- A. Less production
- B. More demand
- C. Inelastic supply
- D. Less aggregate demand in relation to productive capacityCorrect
Explanation. Keynesian economics identifies a deficiency in aggregate demand relative to the economy's productive capacity as the primary cause of economic depression.
Q16
Classical theory advocates ……
- A. Balanced budgetCorrect
- B. Unbalanced budget
- C. Surplus budget
- D. Deficit budget
Explanation. Classical economists strongly favored a laissez-faire approach and believed that the government should maintain a balanced budget, avoiding deficit spending or unnecessary intervention in the economy.
Q17
Keynes theory emphasized on …… equilibrium.
- A. Very short run
- B. Short runCorrect
- C. Very long run
- D. Long run
Explanation. Keynesian economics focuses on the short run, arguing that prices and wages are sticky in the short term, and that policy interventions can help restore full employment during downturns.
Q18
According to classical theory, rate of interest is a reward for ……
- A. Investment
- B. Demand
- C. Capital
- D. SavingCorrect
Explanation. In classical economic theory, the rate of interest is viewed as the price that equilibrates saving and investment, representing the reward individuals receive for postponing consumption and saving their money.
Q19
In Keynes theory, the demand for and supply of money are determined by ……
- A. Rate of interestCorrect
- B. Effective demand
- C. Aggregate demand
- D. Aggregate supply
Explanation. According to Keynes, the rate of interest is determined by the demand for money (liquidity preference) and the supply of money, rather than by the intersection of saving and investment.
Q20
Say's law stressed the operation of …………. in the economy.
- A. Induced price mechanism
- B. Automatic price mechanismCorrect
- C. Induced demand
- D. Induced investment
Explanation. Say's Law of Markets assumes that free markets naturally adjust through an automatic price mechanism, ensuring that supply creates its own demand and the economy operates at full employment without government intervention.
