With reference to the emergence of Macroeconomics, consider the following statements: 1. It emerged as a separate branch of economics after the publication of Adam Smith’s ‘Wealth of Nations’. 2. The Great Depression of 1929 was a key event that led to its development. 3. It theorised the possibility of long-lasting unemployment in an economy. Which of the statements given above is/are correct?

The correct option is 2 and 3 only. Explanation Macroeconomics as a distinct branch of study emerged in response to the limitations of the classical school of thought, particularly its inability to explain prolonged economic downturns. It focuses on aggregate economic variables rather than individual decision-making units. Statement-wise Analysis: - Statement 1 is Incorrect. Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations was published in 1776 and is foundational to Classical Economics, which largely focused on microeconomic principles. Macroeconomics emerged as a separate branch much later, specifically with the publication of John Maynard Keynes’s book, The General Theory of Employment, Interest and Money in 1936. - Statement 2 is Correct. The Great Depression of 1929 was the pivotal event that led to the development of Macroeconomics. The classical economic theories prevalent at the time failed to explain the prolonged fall in output and employment levels, necessitating a new framework to understand the economy as a whole. - Statement 3 is Correct. Classical economists believed that markets clear automatically and that the economy naturally tends toward full employment. The new macroeconomic framework (Keynesian economics) theorized that an economy could remain in a state of equilibrium with significant, long-lasting involuntary unemployment due to insufficient aggregate demand. Key Takeaway: Modern Macroeconomics was born out of the Great Depression and the work of John Maynard Keynes, challenging the classical assumption of self-correcting markets and full employment.

NCERT Class 12 Economics — Chapter 3: Introduction to Macroeconomics and its Concepts

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With reference to the emergence of Macroeconomics, consider the following statements:

It emerged as a separate branch of economics after the publication of Adam Smith’s ‘Wealth of Nations’.
The Great Depression of 1929 was a key event that led to its development.
It theorised the possibility of long-lasting unemployment in an economy.

Which of the statements given above is/are correct?

Official previous-year question

Verified 1 Aug 2026.

Options

A2 only
B1 and 2 only
C1, 2 and 3
D2 and 3 only

Did you get this right?

Solution

The correct option is 2 and 3 only.

Explanation

Macroeconomics as a distinct branch of study emerged in response to the limitations of the classical school of thought, particularly its inability to explain prolonged economic downturns. It focuses on aggregate economic variables rather than individual decision-making units.

Statement-wise Analysis:

Statement 1 is Incorrect. Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations was published in 1776 and is foundational to Classical Economics, which largely focused on microeconomic principles. Macroeconomics emerged as a separate branch much later, specifically with the publication of John Maynard Keynes’s book, The General Theory of Employment, Interest and Money in 1936.
Statement 2 is Correct. The Great Depression of 1929 was the pivotal event that led to the development of Macroeconomics. The classical economic theories prevalent at the time failed to explain the prolonged fall in output and employment levels, necessitating a new framework to understand the economy as a whole.
Statement 3 is Correct. Classical economists believed that markets clear automatically and that the economy naturally tends toward full employment. The new macroeconomic framework (Keynesian economics) theorized that an economy could remain in a state of equilibrium with significant, long-lasting involuntary unemployment due to insufficient aggregate demand.

Key Takeaway:

Modern Macroeconomics was born out of the Great Depression and the work of John Maynard Keynes, challenging the classical assumption of self-correcting markets and full employment.

Your note

More from Chapter 3: Introduction to Macroeconomics and its Concepts

The standard analysis of a capitalist economy is often inapplicable to many tribal societies primarily because:

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Consider the following statements regarding the ‘Household Sector’: 1. Households can earn rent by leasing land. 2. Households are prohibited from lending capital to earn interest. 3. Households provide the demand for the products sold by firms. Which of the statements given above is/are correct?

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Consider the following statements regarding the distinction between microeconomics and macroeconomics: 1. Microeconomics studies the behavior of individual economic agents who always act in the interest of the country as a whole. 2. Macroeconomics deals with aggregate economic variables and the interlinkages between different sectors of an economy. 3. In microeconomics, the ‘macro’ phenomena like inflation or unemployment are usually taken as given. Which of the statements given above is/are correct?

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Consider the following statements regarding the ‘Great Depression of 1929’: 1. It led to a sharp decline in the demand for goods in North American markets. 2. The unemployment rate in the USA remained constant at 3 % between 1929 and 1933. 3. It provided the context for the emergence of macroeconomics as a separate subject. Which of the statements given above is/are correct?

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With reference to the factors of production in a capitalist enterprise, consider the following statements: 1. The money earned by selling the product is called investment. 2. The part of revenue paid for the service rendered by land is called rent. 3. The earnings of the entrepreneur are called profit. Which of the statements given above is/are correct?

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The correct option is 2 and 3 only.

Explanation

Statement-wise Analysis:

Statement 1 is Incorrect. Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations was published in 1776 and is foundational to Classical Economics, which largely focused on microeconomic principles. Macroeconomics emerged as a separate branch much later, specifically with the publication of John Maynard Keynes’s book, The General Theory of Employment, Interest and Money in 1936.
Statement 2 is Correct. The Great Depression of 1929 was the pivotal event that led to the development of Macroeconomics. The classical economic theories prevalent at the time failed to explain the prolonged fall in output and employment levels, necessitating a new framework to understand the economy as a whole.
Statement 3 is Correct. Classical economists believed that markets clear automatically and that the economy naturally tends toward full employment. The new macroeconomic framework (Keynesian economics) theorized that an economy could remain in a state of equilibrium with significant, long-lasting involuntary unemployment due to insufficient aggregate demand.

Key Takeaway:

Modern Macroeconomics was born out of the Great Depression and the work of John Maynard Keynes, challenging the classical assumption of self-correcting markets and full employment.