Macro

Income & Employment

Medium

Read the following report carefully and answer the questions on the basis of the same:

Along with the weakening of global economic activity, inflation the world over also remained muted in 2019. Inflation softened in advanced and emerging economies reflecting a slack in consumer demand. From the supply side, lower energy prices in 2019 also contributed to softening of inflation. In India, inflation rose slightly to 4.1% in April - December 2019, after a sharp decline from 5.9% in 2014 to 3.4% in 2018.

In case of an underemployment equilibrium, which of the following alternative is not true?

Aggregate Demand = Aggregate Supply.

There exist an excess production capacity in the economy.

Resources are not fully and efficiently utilised.

Resources are fully and efficiently utilised.

✅ Correct Option: 4

Option 1 -> In underemployment equilibrium, AD = AS but below full employment level - TRUE.

Option 2 -> Excess production capacity exists due to underutilization - TRUE.

Option 3 -> Resources remain idle and underutilized - TRUE.

Option 4 -> This contradicts the concept of underemployment equilibrium - NOT TRUE.

Hence, Option 4: Resources are fully and efficiently utilised -> In underemployment equilibrium, the economy operates below its full capacity with unemployed labor and idle resources. Full and efficient resource utilization only occurs at full employment equilibrium. The defining characteristic of underemployment equilibrium is that aggregate demand equals aggregate supply at a level where resources are NOT fully utilized, leading to involuntary unemployment and unused productive capacity. -> correct

2026: 13 May Shift 2

The ex-ante term refers to ?

2025: 2 June Shift 1

__________ refers to that level of aggregate demand, which can be met by the corresponding supply in the economy.

2025: 2 June Shift 1

Calculate Marginal Propensity to Save (MPS) and Average Propensity to Consume (APC) at income level of 200.

2026: 15 May Shift 1

Identify the variable on which the overall level of employment and prices in the economy depends upon?

2025: 30 May Shift 1

A perfectly elastic aggregate supply curve implies that:

(A) There is fuller utilization of resources in the economy.

(B) There is unemployment of resources in the economy.

(D) Aggregate demand is less in the economy.

Choose the correct answer from the options given below:

2025: 26 May Shift 2

In an imaginary economy, the planned spending falls short of planned output at a certain level of employment. Arrange the following consequences of the same in sequential order.

(A) Unintended accumulation of inventories.

(B) The employment level falls.

(D) Producers plan to produce less in the next period.

Choose the correct answer from the options given below:

In case of an underemployment equilibrium, which of the following alternative is not true?

Solution

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