Economics · Class 12 Commerce
Ch 3Theories of Employment and Income — Class 12 Economics, concept-first.
The classical economists (Adam Smith, David Ricardo, J. B. Say, A. C. Pigou and others) believed that a free-market economy automatically tends towards full employment of all resources.
Key concepts
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Classical Theory of Employment and Say's Law
The classical economists held that a free-market economy automatically achieves full employment, resting on Say's Law — 'supply creates its own demand' — which claims production generates income exactly sufficient to buy…
Most relevant Q&A
- State and explain Say's Law of Markets. What did the classical economists conclude from it?Free
- What are the main assumptions of the classical theory of employment?Preview
- J.B. Say is a ________. (a) New Economist (b) Neo classical Economist (c) Classical Economist (d) Modern EconomistPreview
- Write Say's "Law of Market".Preview
- J.B. Say is a ________. (a) Modern Economist (b) Neo Classical Economist (c) New Economist (d) Classical EconomistPreview
Chapter contents
The NCERT structure, section by section. Open a section to see its questions, then read the concept-first solution.
The Classical Theory of Employment and Say's Law
The classical economists (Adam Smith, David Ricardo, J. B. Say, A. C. Pigou and others) believed that a free-market economy automatically tends towards full employment of all resources.
Keynes's Critique of the Classical Theory
The classical faith in automatic full employment collapsed during the Great Depression of the 1930s, when millions of willing workers remained unemployed for years and markets showed no sign of self-c…
Aggregate Demand, Aggregate Supply and Effective Demand
At the heart of Keynes's theory are two schedules: aggregate demand and aggregate supply.
Determination of Equilibrium Income and Employment
In the Keynesian model, the equilibrium level of income and employment is fixed where aggregate demand equals aggregate supply, i.e. at the point of effective demand.
Exercises
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- Q1State and explain Say's Law of Markets. What did the classical economists conclude from it?Free
- Q2Distinguish between the Classical theory and the Keynesian theory of employment.Free
- Q3Explain the concept of effective demand with the help of a diagram.Preview
- Q4Why did Keynes argue that equilibrium can occur below the full-employment level? Explain.Preview
- Q6What are the main assumptions of the classical theory of employment?Preview
Sample & Board Papers
Sample papers and previous-year board questions for this subject.
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- Q1J.B. Say is a ________. (a) New Economist (b) Neo classical Economist (c) Classical Economist (d) Modern EconomistPreview
- Q2Write Say's "Law of Market".Preview
- Q3Explain the following in short. (a) Seasonal unemployment (b) Frictional unemployment (c) Educated unemploymentPreview
- Q4Indicate the contribution of J.M. Keynes to Economics : (a) Capital (b) Wealth of Nations (c) Public Finance (d) General TheoryPreview
- Q5J.B. Say is a ________. (a) Modern Economist (b) Neo Classical Economist (c) New Economist (d) Classical EconomistPreview
- Q6Say's law of Market assumes : (a) Short-run analysis (b) Full employment (c) Imperfect competition (d) Under employmentPreview
- Q7What is the main feature of rural unemployment ?Preview
- Q8Explain the following in short : (a) Seasonal unemployment (b) Frictional unemployment (c) Educated unemploymentPreview
- Q9According to Classical theory, rate of interest is a reward for ________. (a) Capital (b) Investment (c) Saving (d) DemandPreview
- Q10The core of the Classical theory of employment is ________. (a) Law of Markets (b) Law of Diminishing Return (c) Law of Consumption (d) Law…Preview
- Q11List out any four assumptions of Say's Law.Preview
- Q12What do you mean by aggregate demand ? Mention its components.Preview
- Q13(a) Describe the types of unemployment. OR (b) What are the differences between Marginal Efficiency of Capital and Marginal Efficiency of In…Preview
- Q14Structural unemployment is a feature in a __________. (a) Dynamic society (b) Static society (c) Mixed economy (d) Socialist societyPreview
- Q15__________ flexibility brings equality between savings and investment. (a) Capital (b) Demand (c) Rate of Interest (d) SupplyPreview
- Q16Define 'Full employment'.Preview
- Q17Give short note on Frictional Unemployment.Preview
- Q18Explain Keyne's theory.Preview
- Q19(a) Narrate the equilibrium between ADF and ASF with diagram. OR (b) Discuss the role of WTO in India's Socio-economic development.Preview
- Q20(a) Critically explain Say's Law of Market. OR (b) Explain the components of Balance of Payments account.Preview
- Q21Indicate the contribution of J.M. Keynes to Economics : (a) Capital (b) Wealth of Nations (c) Public Finance (d) General TheoryPreview
- Q22The core of the classical theory of employment is __________. (a) Law of Diminishing Returns (b) Law of Markets (c) Law of Demand (d) Law of…Preview
- Q23Give reasons for Labour retrenchment at present situation.Preview
- Q24Give short answer to the following. (i) Seasonal Unemployment (ii) Frictional Unemployment (iii) Educated UnemploymentPreview
- Q25Keynes theory emphasized on ______ equilibrium. (a) Very long run (b) Very short run (c) Long run (d) Short runPreview
- Q26Define Full employment.Preview
- Q27Explain about Aggregate Supply with the help of diagram.Preview