CBSE 2024, Set 2

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.

Edvaya · Accepted Answer

The correct answer is Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).. Assertion (A) is true as equilibrium occurs where planned aggregate demand (ex-ante spending) equals planned aggregate supply (ex-ante output). Reason (R) is also true as equilibrium can be achieved at under-employment, full employment, or over-full employment levels. However, Reason (R) does not explain *why* equilibrium is determined at the point where ex-ante spending equals ex-ante output.

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Economics > Introductory Macroeconomics > Determination Of Income Employment

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