Practice Key Concepts (2.2) - Chapter 2: Theory of Income and Employment

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6 sample questions

Question 1.
What is Aggregate Demand and its components?
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Think of C, I, G, and X.
Question 2.
Define underemployment.
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Consider jobs below one's skill level.
3Question 3.
What is the formula for Aggregate Demand?
- AD = C + I + G + (X - M)
- AD = C - I + G + X
- AD = I + G + Exports
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Recall the elements that comprise Aggregate Demand.
4Question 4.
Is it true that structural unemployment occurs when there's a mismatch between the skills of workers and available jobs?
- True
- False
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Think about what happens when skills do not align with job demands.
Question 5.
Analyze a situation where government expenditure increases significantly. How would this affect Aggregate Demand and the economy's equilibrium?
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Consider how increased public spending impacts overall consumption and investment.
Question 6.
Consider a scenario where a country faces high structural unemployment. What policies could be recommended based on Keynesian economics to address this issue?
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Think about how education can align skills with job market needs.

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