Question

Match List-I with List-II.

List-I	List-II
A. Classical Model	I. Supply creates its own demand
B. Effective Demand	II. Level of aggregate demand where planned saving = planned investment
C. Say's law	III. Output determined by aggregate demand in short run
D. Keynesian Model	IV. Price and wage flexible full employment assumed

• A. A-III, B-IV, C-II, D-I
• B. A-IV, B-I, C-II, D-III
• C. A-IV, B-II, C-I, D-III
• D. A-IV, B-II, C-III, D-I

Hint:

Classical model assumes flexible prices and wages, while Keynesian model gives importance to aggregate demand in determining output.

Answer 1

The Correct Option is C

Concept: Classical and Keynesian models differ in their assumptions about flexibility, employment and demand.

Step 1: Match Classical Model.
The classical model assumes flexible prices and wages and generally full employment equilibrium. \[ A \rightarrow IV \]

Step 2: Match Effective Demand.
Effective demand is the level of aggregate demand where planned saving equals planned investment. \[ S=I \] So, \[ B \rightarrow II \]

Step 3: Match Say's Law.
Say's Law states that supply creates its own demand. \[ C \rightarrow I \]

Step 4: Match Keynesian Model.
In the Keynesian model, output is determined by aggregate demand in the short run. \[ D \rightarrow III \] Therefore, the correct matching is: \[ A-IV,\ B-II,\ C-I,\ D-III \]