CUET UG 2025 — Economics Macro

2025mcqmedium

The impact of the above situation under the Keynesian theory of income and employment in an economy is?

Official previous-year question

Held on 3 Jun 2025 · Verified 13 Jul 2026.

Options

The correct option is:
Decrease in income, output and employment.

The Situation Described: The report highlights a global weakening of economic activity and a slack in consumer demand (a reduction in aggregate demand), leading to muted and softening inflation.
Keynesian Application: According to Keynesian theory, in the short run, the levels of national income, output, and employment are strictly determined by the level of Aggregate Demand (AD).

When consumer demand slacks (AD shifts to the left), firms face involuntary inventory accumulation.
To adapt, producers cut down on production, which directly leads to a decrease in output and real income.
As production falls, firms lay off workers, causing a decrease in employment.

Work through every CUET UG Macro PYQ, year by year.

The correct option is:
Decrease in income, output and employment.

The Situation Described: The report highlights a global weakening of economic activity and a slack in consumer demand (a reduction in aggregate demand), leading to muted and softening inflation.
Keynesian Application: According to Keynesian theory, in the short run, the levels of national income, output, and employment are strictly determined by the level of Aggregate Demand (AD).

When consumer demand slacks (AD shifts to the left), firms face involuntary inventory accumulation.
To adapt, producers cut down on production, which directly leads to a decrease in output and real income.
As production falls, firms lay off workers, causing a decrease in employment.