Question:
Read the following statements: Assertion (A) and Reason (R). Choose the correct alternative from the options given below:
Assertion (A): When the allocative function is performed well, scarce resources are allocated to those firms which have the highest productivity for the economy.
Reason (R): Allocative function allocates or directs funds into their most productive investment opportunity.
Read the following statements: Assertion (A) and Reason (R). Choose the correct alternative from the options given below:
Assertion (A): When the allocative function is performed well, scarce resources are allocated to those firms which have the highest productivity for the economy.
Reason (R): Allocative function allocates or directs funds into their most productive investment opportunity.
Reason (R): Allocative function allocates or directs funds into their most productive investment opportunity.
Show Hint
Effective allocation of resources in financial markets leads to economic efficiency and higher productivity.
Investors should focus on optimal allocation for long-term growth.
Updated On: Jan 13, 2026
- Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
- Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
- Assertion (A) is true, but Reason (R) is false.
- Assertion (A) is false, but Reason (R) is true.
Show Solution
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The Correct Option is A
Solution and Explanation
Step 1: Understanding the Allocative Function
The allocative function of financial markets ensures that scarce financial resources are directed towards the most productive economic activities. Step 2: Evaluating the Statements
- The assertion states that well-performed allocation directs resources to highly productive firms, which is true.
- The reason explains that the allocative function guides funds to the best investment opportunities, making it a valid explanation.
Since the reason accurately supports the assertion, option (A) is correct. Conclusion: The correct answer is (mathbf{(A)}), as the explanation correctly justifies the assertion.
The allocative function of financial markets ensures that scarce financial resources are directed towards the most productive economic activities. Step 2: Evaluating the Statements
- The assertion states that well-performed allocation directs resources to highly productive firms, which is true.
- The reason explains that the allocative function guides funds to the best investment opportunities, making it a valid explanation.
Since the reason accurately supports the assertion, option (A) is correct. Conclusion: The correct answer is (mathbf{(A)}), as the explanation correctly justifies the assertion.
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