A. The producers who were reluctant to employ all workers at the original wage rate will now find it profitable to employ extra workers at lower wage rate. PPP is a. a theory that tells us that exchange rates between currencies are in equilibrium. The Questions and
Households receive income exactly equal to the value of goods and services produced. Share Your PPT File, Classical Theory of Income and Employment, Theories of Interest: Top 6 Theories | Money | Economics. In this class, Prem Chand will provide a detailed explanation(with diagrams) of the Classical Theory of Employment and Output (income). | EduRev B Com Question is disucussed on EduRev Study Group by 145 B â¦ The equilibrium rate of interest is one which brings about S-I equality. Say (1767-1832). Multiple Choice Questions with Answer: 1. (c) The economy is characterised by competitive forces in both product and resource markets. Criticisms. That is, the production of any good would automatically provide the wherewithal to take the output off the market. The short- run classical theory of income and employment can be explained through the following three stages: 1. Thus all that businessmen need to do to sell a full-employment output is to produce that output; “Say’s Law guarantees that there will be sufficient consumption spending for its successful disposal”. If the recipients of income in this simple model save a portion of their income, consumption expenditure will fall short of total output and supply would no longer create its own demand. (c) Keynes also argued that’ even if wages and prices were flexible a free enterprise economy would not always be able to achieve automatic full employment. Say. In this article we will discuss about the classical theory of income and employment. We have provided Determination of Income and Employment â¦ In fact, businessmen produce not only consumption goods for sale to households but investment (capital) goods for sale to other firms (or to one another). 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