Question

Level of employment is determined by which of the following?

• A. Output Equilibrium
• B. Factor of Production
• C. Capital Employed
• D. Availability of Raw Material
• A. Everyone in the economy got employment
• B. Maximum Capital investment
• C. All the factors of production are fully employed in the production process
• D. Excessive Demand
• A. Full Employment
• B. Excessive Demand
• C. Marginal Output
• D. Equality of Income (Y) with Aggregate Demand (AD)
• A. Deficient Demand
• B. Constant Demand
• C. Marginal Demand
• D. Aggregate Demand
• A. Output level is less than the full employment level
• B. Output level is equal to the full employment level
• C. Demand is more than output level at full employment level
• D. Output level is marginally increasing

Answer 1

The Correct Option is A

Step 1: Link between output and employment.
Employment in an economy is directly linked with the level of output. When aggregate output rises, producers require more workers; when it falls, employment decreases. Therefore, the determinant of employment is the equilibrium level of output.
Step 2: Role of output equilibrium.
Equilibrium output is established where Aggregate Demand (AD) equals Aggregate Supply (AS). This balance defines how much is produced, which in turn dictates how many workers are hired. If output equilibrium is below full employment level, unemployment exists. If above, inflationary pressures occur.
Step 3: Option-wise evaluation.
- (A) Output Equilibrium: Correct. Employment depends on the equilibrium output where AD = AS.
- (B) Factor of Production: These are inputs, but employment depends on their utilization, not their mere existence.
- (C) Capital Employed: Important for production but not the main determinant of employment.
- (D) Availability of Raw Material: Necessary, but employment is governed by demand-driven output equilibrium.
Step 4: Conclusion.
The level of employment in an economy is determined by the equilibrium level of output, as explained by Keynesian theory.
Final Answer: \[ \boxed{\text{Output Equilibrium}} \]

Answer 2

Step 1: Meaning of full employment.
Full employment does not mean that every single person in the economy has a job. There will always be some level of frictional or voluntary unemployment. Instead, full employment refers to a situation where all available factors of production (land, labour, capital, and entrepreneurship) are fully utilized in the production process.
Step 2: Evaluate the options.
- Option (A): Incorrect, because “everyone got employment” is unrealistic—some natural unemployment will always exist.
- Option (B): Incorrect, because maximum capital investment does not guarantee full employment of all factors.
- Option (C): Correct, as full employment occurs when all factors of production are fully engaged in productive activity.
- Option (D): Incorrect, as excessive demand creates inflationary conditions, not full employment.
Step 3: Conclusion.
Hence, full employment is correctly defined as the state where all factors of production are fully employed.
Final Answer: \[ \boxed{\text{All the factors of production are fully employed in the production process}} \]

Answer 3

Step 1: Recall Keynesian theory of output.
In Keynesian economics, the actual level of output in the economy is not determined by full employment alone. Instead, it is determined where aggregate demand (AD) equals aggregate income/output (Y). This is called the equilibrium level of output.
Step 2: Evaluate each option.
- Option (A): Full Employment – Wrong. Full employment may not always be achieved; equilibrium can exist even with unemployment.
- Option (B): Excessive Demand – Wrong. This refers to inflationary pressure, not determination of output.
- Option (C): Marginal Output – Wrong. This is not an economic criterion for determining equilibrium output.
- Option (D): Equality of Income (Y) with Aggregate Demand (AD) – Correct. At this point, planned expenditure (AD) matches actual output (Y), defining the equilibrium level of output.
Step 3: Conclusion.
The level of output is determined by the point of equality of AD and Y.
Final Answer: \[ \boxed{\text{Equality of Income (Y) with Aggregate Demand (AD)}} \]

Answer 4

Step 1: Recall the concept of full employment output.
Full employment output is the maximum sustainable level of output when all factors of production are fully utilized.
Step 2: When equilibrium output is below full employment.
If the aggregate demand (AD) in the economy is not sufficient to buy the full employment level of output, the actual equilibrium output will be below full employment output. This creates unemployment.
Step 3: Naming the condition.
This situation is termed as deficient demand because demand is insufficient to maintain full employment production. Step 4: Eliminating wrong options.
- Constant Demand: Incorrect, not an economic term.
- Marginal Demand: Incorrect, irrelevant concept here.
- Aggregate Demand: AD determines equilibrium, but the condition here is “deficient demand.”
Final Answer: \[ \boxed{\text{Deficient Demand}} \]

Answer 5

Step 1: Define excess demand.
Excess demand occurs when aggregate demand (AD) is greater than aggregate supply (AS) at full employment level of output.
Step 2: Implication of excess demand.
Since all factors of production are already fully employed, the economy cannot increase real output further. Instead, the additional demand only causes inflationary pressure (rise in prices).
Step 3: Evaluate the options.
- (A): Incorrect, this is deficient demand.
- (B): Incorrect, equality at full employment does not describe excess demand.
- (C): Correct, because excess demand arises when demand>output at full employment.
- (D): Incorrect, marginal increase is not relevant here.
Step 4: Conclusion.
Thus, excess demand is the situation when demand is more than output available at full employment.
Final Answer: \[ \boxed{\text{Demand is more than output level at full employment level}} \]