Question : The classical theory of income determination assumes that:
Option 1: Prices and wages are sticky
Option 2: Prices and wages adjust quickly
Option 3: Consumption is the main driver of economic growth
Option 4: Government intervention is necessary to achieve full employment
Correct Answer: Prices and wages adjust quickly
Solution : The correct answer is (b) Prices and wages adjust quickly
The classical theory of income determination, often associated with classical economists such as Adam Smith and David Ricardo, posits that markets are efficient and self-adjusting. According to this theory, prices and wages are flexible and will adjust quickly to equate supply and demand in the economy.
In the classical view, if there is a temporary imbalance between aggregate demand and aggregate supply, prices and wages will adjust to restore equilibrium. For example, if there is excess demand in the economy, prices will rise, reducing demand and increasing supply until equilibrium is reached.
The classical theory emphasizes the role of free markets and believes that government intervention is generally unnecessary for achieving full employment and economic growth. It places less emphasis on consumption as the main driver of economic growth compared to the Keynesian theory.
Question : Inclusive growth refers to:
Option 1: Economic growth that benefits only a few individuals or groups
Option 2: Economic growth that benefits all individuals or groups
Option 3: Economic growth that benefits the government
Option 4: Economic growth that benefits foreign investors
Question : What is the primary purpose of transport infrastructure?
Option 1: Providing employment
Option 2: Enhancing economic growth
Option 3: Promoting social equality
Option 4: Protecting the environment
Question : The concept of sustainable development emphasizes:
Option 1: Economic growth at any cost
Option 2: Environmental protection at any cost
Option 3: Balancing economic growth and environmental protection
Option 4: Reducing economic growth for the sake of environmental protection
Option 4: Reducing economic growth for environmental protection
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