i. Keynes did not accept the classical view that reduction in money wages led to full employment.
ii. He emphasized that unemployment could be removed by raising the effective demand.
iii. According to Keynes, a cut in money wages applied to the economy as a whole reduces employment rather than increasing it.

i. According to Say‘s Law, full employment is maintained by an automatic and self adjustment mechanism in the long run.
ii. But Keynes had no patience to wait for the long period for he believed that – In the long run we are all dead.
iii. It is not the automatic adjustment process which removes unemployment.
iv. But unemployment can be removed by increase in the rate of investment.

The following are the criticisms against Say’s law:
1. According to Keynes, supply does not create its demand. It is not applicable where demand does not increase as much as production increases.
2. Automatic adjustment process will not remove unemployment. Unemployment can be removed by increase in the rate of investment

David Ricardo, J.S.Mill, J.B.Say and A.C.Pigou. List some limitations of GDP as a measurement of social welfare.

1. Cyclical unemployment exists during the downturn phase of trade cycle in the economy.
2. In a business cycle during the period of recession and depression, income and output fall leading to widespread unemployment.

i. Cyclical Unemployment
ii. Seasonal Unemployment
iii. Frictional Unemployment
iv. Educated Unemployment
v. Technical Unemployment
vi. Structural Unemployment
vii. Disguised Unemployment

Unemployment is problem faced when there are people, who are willing to work and able to work but can't find suitable job.

Keynes theory of employment was based on the view of the short run. According to him, the factors of production such as capital goods, supply of labour, technology and efficiency of labour remain unchanged while determining the level of employment.

(i) Consumption Demand
(ii) Investment Demand
(iii) Government Expenditure
(iv) Net Export (Export - Import)

Cyclical Unemployment:
(i) This unemployment exists during the downturn phase of trade cycle in the economy.
(ii) In a business cycle during the period of recession and depression, income and output fall leading to widespread unemployment.

(i) Effective demand is the money spent on consumption of goods and services and on investment.
(ii) Employment and output depends on the level of effective demand
(iii) When effective demand increases, employment will increase.
(iv) Effective demand is determined by aggregate supply and aggregate demand.

1. No single buyer or seller can affect the price.
2. Full employment
3. People are motivated by self interest Market forces determine everything right.
4. Perfect competition exists in labour and product market.
5. There is wage price flexibility.
6. Money acts as medium of exchange.
7. Long run analysis.
8. No overproduction or unemployment.

(i) It arises due to imbalance between supply of labour and demand for labour.
(ii) It is because of immobility of labour, lack of necessary skills, breakdown of machinery, shortage of raw materials.
(iii) The persons who lose jobs and in search of jobs are also included.

The major feature of rural unemployment is the existence of unemployment in the form of disguised unemployment and seasonal unemployment.

(i) "Full employment is the absence of involuntary unemployment." - Keynes
(ii) "Full employment is that level of employment at which any further increase in spending would result in an inflationary spiral of wages and prices" - Lerner