Which of the following is a feature of the classical theory of employment?
A. Liquidity trap
B. Full employment as a normal condition
C. Importance of effective demand
D. Possibility of underemployment equilibrium
Answer: Option B
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.
Explanation:
Market failure occurs when free markets fail to allocate resources efficiently. Causes include externalities, public goods, asymmetric information and monopoly power. Perfect competition is an ideal, not a failure.
Explanation:
The Palma ratio is the ratio of the income share of the richest 10 per cent of the population to that of the poorest 40 per cent; it focuses on the tails of the distribution that account for most inequality.
No comments yet. Be the first to start the discussion!