Which of the following statements about the theory of John Maynard Keynes, as used in NCERT, is NOT correct?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → In this model, output is fixed by aggregate supply, and aggregate demand adjusts to it.
In the Keynesian model, price is fixed and supply is perfectly elastic. So output is decided by aggregate demand, not the other way round.
Option (1) Keynes is arguably the founder of macroeconomics as a separate discipline. — True. Keynes is called arguably the founder of macroeconomics as a separate discipline.
Option (2) The model of income determination in NCERT is based on the theory given by Keynes. — True. This model rests on the theory of Keynes.
Option (3) In this model, the equilibrium level of output need not be the full employment level of output. — True. Equilibrium can come with unemployment, below full employment.
Option (4) In this model, output is fixed by aggregate supply, and aggregate demand adjusts to it. — False. Output is determined solely by aggregate demand; supply adjusts at the fixed price.
NCERT (2026-27): “The theoretical model used in this chapter is based on the theory given by John Maynard Keynes.” “Summary … We also assume that the aggregate supply is perfectly elastic at this price. Under such circumstances, aggregate output is determined solely by the level of aggregate demand. This is known as effective demand principle.” Glossary: “John Maynard Keynes (1883 – 1946) – Arguably the founder of Macroeconomics as a separate discipline.” |