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According to Keynesian theory of income determination, at full employment a fall in aggregate demand causes            
  • a)
    a fall in prices of output and resources    
  • b)
    a fall in real gross National product and employment    
  • c)
    a rise in real gross National product and investment    
  • d)
    a rise in prices of output and resources
Correct answer is option 'A'. Can you explain this answer?
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According to Keynesian theory of income determination, at full employm...
The correct option is A.
According to Keynesian theory of income determination, at full employment a fall in aggregate demand causes a fall in prices of output and resources.
 
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According to Keynesian theory of income determination, at full employm...


Explanation:

Keynesian Theory of Income Determination:
In the Keynesian theory, at full employment, the economy is operating at its maximum potential level of output and employment. Aggregate demand plays a crucial role in determining the level of economic activity in the short run.

Impact of a Fall in Aggregate Demand at Full Employment:
When there is a fall in aggregate demand at full employment, it means that the total spending in the economy is decreasing. This can lead to a chain of events that can impact the economy in various ways.

Fall in Prices of Output and Resources:
- A fall in aggregate demand means that businesses are producing more goods and services than consumers are willing to purchase.
- To clear the excess supply, businesses may be forced to reduce prices of their output to stimulate demand.
- As a result, both output prices and resource prices may fall in order to match the reduced demand levels.

Impact on Real Gross National Product and Employment:
- The fall in aggregate demand can lead to a decrease in real gross national product (GNP) as businesses produce less due to lower demand.
- This decrease in production can also lead to a decline in employment levels as firms may need fewer workers to meet the reduced demand for goods and services.

Conclusion:
In conclusion, according to the Keynesian theory of income determination, at full employment, a fall in aggregate demand can lead to a fall in prices of output and resources. This decline in demand can have a negative impact on real GNP and employment levels in the economy.
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According to Keynesian theory of income determination, at full employment a fall in aggregate demand causes a)a fall in prices of output and resources b)a fall in real gross National product and employment c)a rise in real gross National product and investment d)a rise in prices of output and resourcesCorrect answer is option 'A'. Can you explain this answer?
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According to Keynesian theory of income determination, at full employment a fall in aggregate demand causes a)a fall in prices of output and resources b)a fall in real gross National product and employment c)a rise in real gross National product and investment d)a rise in prices of output and resourcesCorrect answer is option 'A'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about According to Keynesian theory of income determination, at full employment a fall in aggregate demand causes a)a fall in prices of output and resources b)a fall in real gross National product and employment c)a rise in real gross National product and investment d)a rise in prices of output and resourcesCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for According to Keynesian theory of income determination, at full employment a fall in aggregate demand causes a)a fall in prices of output and resources b)a fall in real gross National product and employment c)a rise in real gross National product and investment d)a rise in prices of output and resourcesCorrect answer is option 'A'. Can you explain this answer?.
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