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B Com Exam  >  B Com Tests  >  Macro Economics  >  Test: Theories of Employment - B Com MCQ

Test: Theories of Employment - B Com MCQ


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10 Questions MCQ Test Macro Economics - Test: Theories of Employment

Test: Theories of Employment for B Com 2024 is part of Macro Economics preparation. The Test: Theories of Employment questions and answers have been prepared according to the B Com exam syllabus.The Test: Theories of Employment MCQs are made for B Com 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Theories of Employment below.
Solutions of Test: Theories of Employment questions in English are available as part of our Macro Economics for B Com & Test: Theories of Employment solutions in Hindi for Macro Economics course. Download more important topics, notes, lectures and mock test series for B Com Exam by signing up for free. Attempt Test: Theories of Employment | 10 questions in 10 minutes | Mock test for B Com preparation | Free important questions MCQ to study Macro Economics for B Com Exam | Download free PDF with solutions
Test: Theories of Employment - Question 1
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What is the primary factor that determines the consumption function in the Keynesian theory?

Detailed Solution for Test: Theories of Employment - Question 1
In the Keynesian theory of employment, the consumption function is primarily determined by the size of income and the propensity of individuals to consume. The consumption function represents the relationship between total consumption expenditure and total income. As income increases, consumption also tends to increase, but not proportionately. The level of consumption is influenced by people's propensity to consume, which refers to the portion of income that individuals choose to spend on goods and services.
Test: Theories of Employment - Question 2
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What determines the marginal efficiency of capital in the Keynesian theory?

Detailed Solution for Test: Theories of Employment - Question 2
The marginal efficiency of capital in the Keynesian theory is determined by the prospective yields of capital assets (expected returns on investments) and the supply prices or replacement costs of these assets. Business expectations regarding potential profits from capital investments play a crucial role in influencing the marginal efficiency of capital. This factor makes the marginal efficiency of capital a highly fluctuating element, contributing to economic instability.
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Test: Theories of Employment - Question 3
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According to Keynes, which of the following elements is highly unstable and fluctuating in the short run?

Detailed Solution for Test: Theories of Employment - Question 3
According to Keynes, the investment function is highly unstable and fluctuating in the short run. The main determinant of the investment function is the marginal efficiency of capital, which is influenced by business psychology, business optimism, and pessimism. This makes investment spending prone to rapid changes based on shifts in expectations about the prospective returns from capital assets. Consequently, investment expenditure can vary significantly, contributing to economic instability.
Test: Theories of Employment - Question 4
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What is the main determinant of the level of employment according to the Keynesian theory?
Detailed Solution for Test: Theories of Employment - Question 4
According to the Keynesian theory of employment, the main determinant of the level of employment is investment expenditure or the inducement to invest. Keynes emphasized that to increase employment and income, effective demand needs to be raised, and for this purpose, investment expenditure should be increased. Investment and employment are closely linked, and the level of investment needs to be high enough to bridge the gap between income and consumption as income increases.
Test: Theories of Employment - Question 5
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According to the Keynesian theory of employment, the national income is equal to:
Detailed Solution for Test: Theories of Employment - Question 5
According to the Keynesian theory of employment, the national income is equal to the total output of goods and services in an economy. This means that the total income earned by individuals, firms, and the government is determined by the total value of goods and services produced. This concept highlights the fundamental relationship between production and income.
Test: Theories of Employment - Question 6
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Which of the following components make up the effective demand in an economy according to the Keynesian theory?
Detailed Solution for Test: Theories of Employment - Question 6
According to the Keynesian theory of employment, effective demand is composed of two elements: the aggregate demand function and the aggregate supply function. The aggregate demand function is the combination of consumption expenditure and investment expenditure. These two components collectively determine the level of spending in the economy and play a crucial role in determining the overall level of employment.
Test: Theories of Employment - Question 7
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Which component of effective demand is considered stable in the short run by Keynes?
Detailed Solution for Test: Theories of Employment - Question 7
Keynes regarded the consumption function as a stable phenomenon in the short run. This means that the relationship between consumption expenditure and income remains relatively constant over a short period of time. While investment and the overall level of effective demand can be volatile, consumption tends to be more predictable due to established spending patterns and habits of individuals.
Test: Theories of Employment - Question 8
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What is the relationship between the marginal efficiency of capital and the rate of interest in the Keynesian theory?
Detailed Solution for Test: Theories of Employment - Question 8
In the Keynesian theory, the difference between the marginal efficiency of capital (expected returns from investments) and the rate of interest plays a crucial role in determining the inducement to invest. If the marginal efficiency of capital is significantly higher than the rate of interest, there is a greater incentive for firms to invest. Conversely, if the marginal efficiency of capital is lower than the rate of interest, investment inducement is reduced. This relationship between the two factors affects the overall level of investment and employment.
Test: Theories of Employment - Question 9
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What does the term "liquidity preference" refer to in the Keynesian theory?
Detailed Solution for Test: Theories of Employment - Question 9
In the Keynesian theory of employment, "liquidity preference" refers to the desire of individuals to hold money in the form of cash or highly liquid assets rather than spending it immediately. This desire is driven by various motives, including the need for transactions, precautionary savings, and speculative purposes. Keynes identified these motives as influencing the demand for money and, consequently, the determination of the rate of interest.
Test: Theories of Employment - Question 10
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What is the primary factor that Keynes emphasized for increasing the level of employment and income in an economy?
Detailed Solution for Test: Theories of Employment - Question 10
Keynes emphasized that to increase the level of employment and income in an economy, it is essential to increase investment expenditure. Investment plays a critical role in raising the effective demand, which in turn leads to increased production and employment. According to Keynes, investment expenditure needs
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