Question

Read the following statements: Assertion (A) and Reason (R). Choose the correct alternative from those given below: 
Assertion (A): The equilibrium level of income is determined when ex-ante spending and ex-ante output are equal. 
Reason (R): The equilibrium level of income may or may not be the same as the full employment level of output.

• A. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
• B. Both Assertion (A) and Reason (R) are true, but Reason (R) is {not} the correct explanation of Assertion (A).
• C. Assertion (A) is true, but Reason (R) is false.
• D. Assertion (A) is false, but Reason (R) is true.

Hint:

Equilibrium income is determined by the equality of ex-ante spending and output, which may not coincide with full employment due to demand fluctuations.

Answer 1

The Correct Option is B

Assertion (A): This is true because the equilibrium level of income is achieved when planned (ex-ante) spending equals planned (ex-ante) output, ensuring no unintended inventory changes. 
Reason (R): This is also true because the equilibrium level of income is not necessarily the same as the full employment output. It can occur below or above the full employment level depending on the level of aggregate demand. 
Conclusion: Although both statements are correct, the reason does not fully explain the assertion in terms of equilibrium determination. 
In the light of the given statements, choose the correct alternative from the following: 
Option (A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A). 
Option (B) Both Assertion (A) and Reason (R) are true, but Reason (R) is {not} the correct explanation of Assertion (A). 
Option (C) Assertion (A) is true, but Reason (R) is false. 
Option (D) Assertion (A) is false, but Reason (R) is true. 
Correct Answer: (B) Both Assertion (A) and Reason (R) are true, but Reason (R) is {not} the correct explanation of Assertion (A).