According to J.M. Keynes, what is the main cause of unemployment in developed countries?

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  1. High Population
  2. Introduced Automation
  3. Low effective demand
  4. Low quality of Education

Answer (Detailed Solution Below)

Option 3 : Low effective demand
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The correct answer is Low effective demand.

Key Points

  • J.M. Keynes argued that unemployment arises due to a deficiency in effective demand in the economy.
  • Effective demand refers to the total demand for goods and services in the economy at a given time.
  • When effective demand is low, businesses reduce production, leading to fewer job opportunities.
  • Keynes advocated for government intervention to boost demand through fiscal policies.

Important Points

  • Keynes' theory focuses on aggregate demand as the primary driver of employment and economic activity.
  • Governments can increase effective demand through public spending, tax cuts, or monetary policies.
  • Keynes' ideas laid the foundation for modern macroeconomics and influenced policies during the Great Depression.
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