Which of the following is a feature of the classical theory of employment?
A. Full employment as a normal condition
B. Possibility of underemployment equilibrium
C. Importance of effective demand
D. Liquidity trap
Answer: Option A
Solution (By JKSSB Mock Tests)
Classical theory assumes that the economy always tends towards full employment through flexible wages and prices. Underemployment equilibrium and liquidity trap are Keynesian concepts.
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