Q.Distinguish between the Classical theory and the Keynesian theory of employment.

Keynes focused on short-run equilibrium, so the answer is (d).

In the theories of employment and income topic of the Tamil Nadu HSC Commerce syllabus, the classical economists believed that in the long run the economy always tends towards full-employment equilibrium (Say's Law).

Keynes disagreed. In his famous remark, 'In the long run we are all dead', he argued that policy must address the here and now. He therefore analysed the short run — a period in which wages, prices and the capital stock do not fully adjust — and showed that the economy can settle at an under-employment (less than full employment) equilibrium determined by effective demand.

Hence Keynesian theory is essentially a short-run analysis of income and employment.

Keynes's landmark contribution to economics is "The General Theory of Employment, Interest and Money" (1936) — option (d).

In the Tamil Nadu HSC Class-12 Economics syllabus (Theories of Employment and Income), John Maynard Keynes is the central figure of modern macroeconomics. His most influential book, The General Theory of Employment, Interest and Money (1936), founded Keynesian economics and gave the concept of effective demand and involuntary unemployment.

The other options belong to different economists: Capital (Das Kapital) — Karl Marx; Wealth of Nations — Adam Smith; and Public Finance is a general subject/text not attributed to Keynes as his main contribution.

Structural unemployment is a feature of a dynamic society, where continuous structural change in the economy makes some workers' skills or industries redundant.

Structural unemployment occurs because of fundamental changes in the make-up of the economy: introduction of new technology, shifts in consumer demand from one product to another, decline of old industries and rise of new ones, and mismatch between the skills workers have and the skills employers need.

Such changes happen only in a dynamic society — one that is constantly growing and transforming. A static society, by definition, does not change, so no structural shifts (and hence no structural unemployment) can occur in it. Therefore structural unemployment is a mark of a dynamic, changing economy.

Keynes's major contribution is 'The General Theory of Employment, Interest and Money' (1936), so option (d) is correct.

John Maynard Keynes published 'The General Theory of Employment, Interest and Money' in 1936, which laid the foundation of modern macroeconomics and the theory of effective demand.

• (a) Capital — the work of Karl Marx.

• (b) Wealth of Nations — Adam Smith (1776).

• (c) Public Finance — not a Keynes work.