Question

Choose the correct statements from the following :
(A) Adam Smith is termed as Father of Modern Economics.
(B) J.M. Keynes gave the Theory of Income, Output and Employment.
(C) Four Sector Model = C + I + G + (X – M)
(D) Store of value is primary function of money.
Choose the correct answer from the options given below :

• A. (A), (B) and (D) only
• B. (A), (B) and (C) only
• C. (A), (B), (C) and (D)
• D. (B), (C) and (D) only

Answer 1

The Correct Option is B

The task is to determine which statements regarding economics are correct from the options provided. Let's evaluate each statement:

1. (A) Adam Smith is termed as Father of Modern Economics. 
   This statement is correct. Adam Smith is widely recognized for his work "The Wealth of Nations," which laid the foundations of modern economics.
2. (B) J.M. Keynes gave the Theory of Income, Output and Employment.
   This statement is correct. John Maynard Keynes developed this theory, which is a fundamental aspect of Keynesian economics.
3. (C) Four Sector Model = C + I + G + (X – M)
   This statement is correct. The Four Sector Model in economics comprises Consumption (C), Investment (I), Government Spending (G), and Net Exports (X - M), representing an open economy.
4. (D) Store of value is primary function of money.
   This statement is incorrect. Although storing value is a function of money, the primary function typically refers to being a medium of exchange.

Based on the evaluation above, the correct statements are (A), (B), and (C), matching with the answer choice: (A), (B) and (C) only.

Answer 2

Adam Smith, often referred to as the Father of Modern Economics, laid the foundations of classical economics with his seminal work, "The Wealth of Nations" (1776). Smith introduced the concept of the invisible hand, emphasizing that individuals acting in their own self-interest unintentionally contribute to the overall economic well-being of society. His ideas about free markets, competition, and the division of labor have had a lasting impact on economic theory and policy.

John Maynard Keynes revolutionized economic thought with his Theory of Income, developed during the Great Depression in the 1930s. Keynes argued that aggregate demand, which is the total demand for goods and services in an economy, is the key driver of economic growth and employment. His work laid the groundwork for modern macroeconomics, advocating for government intervention in the economy through fiscal policies to manage demand and smooth out business cycles.

The four-sector model of the economy incorporates four key components: C (Consumption), I (Investment), G (Government spending), and (X – M) (Net exports, where X is exports and M is imports). The equation for the four-sector model is:

\( C + I + G + (X - M) \)

This model highlights the interactions between different sectors of the economy and shows how total economic activity is influenced by consumer spending, business investment, government expenditure, and foreign trade. It serves as a useful framework for understanding national income and macroeconomic equilibrium.