Question : Assertion: In the determination of equilibrium output, only ex-ante saving and ex-ante investment is considered.
Reason: Ex-ante saving and ex-ante investment are always equal to each other.
Option 1: Both Assertion and Reason are correct, and the Reason is the correct explanation of the Assertion.
Option 2: Both Assertion and Reason are correct, but the Reason is NOT the correct explanation of the Assertion.
Option 3: Assertion is correct, but the Reason is incorrect.
Option 4: Assertion is incorrect, but the reason is correct
Correct Answer: Assertion is correct, but the Reason is incorrect.
Solution : The correct answer is (C) Assertion is correct, but the Reason is incorrect.
Assertion states that in the determination of equilibrium output, only ex-ante saving and ex-ante investment are considered. This assertion is correct to a certain extent. In the determination of equilibrium output in macroeconomics, the focus is often on the equality of aggregate demand and aggregate supply. While ex-ante saving and ex-ante investment play a crucial role in this analysis, other factors such as consumption, government spending, net exports, and other components of aggregate demand are also taken into account.
Reason states that ex-ante saving and ex-ante investment are always equal to each other. This reason is incorrect. Ex-ante saving and ex-ante investment are not always equal to each other. In theory, they are assumed to be equal in the simplified Keynesian model, but in reality, they can diverge due to various factors such as changes in expectations, financial intermediation, and unplanned inventory accumulation.
Therefore, while Assertion is correct as it mentions the consideration of ex-ante saving and ex-ante investment in the determination of equilibrium output, Reason is incorrect as ex-ante saving and ex-ante investment are not always equal to each other.
Question : Assertion: Microeconomics studies the behavior of individual households and firms in making economic decisions.
Reason: Microeconomics aims to understand the allocation of scarce resources and the determination of prices in specific markets.
Option 1: Both the assertion and reason are true, and the reason is a correct explanation of the assertion.
Option 2: Both the assertion and reason are true, but the reason is not a correct explanation of the assertion.
Option 3: The assertion is true, but the reason is false.
Option 4: The assertion is false, but the reason is true.
Question : Assertion: Microeconomics focuses on the individual units of an economy, such as households and firms.
Reason: Microeconomics examines the allocation of resources and the determination of prices in specific markets.
Question : In the Keynesian theory of income determination, equilibrium income is achieved when:
Option 1: Aggregate demand equals aggregate supply
Option 2: Consumption equals savings
Option 3: Investment equals savings
Option 4: Leakages equal injections
Question : Which of the following statement are true?
Option 1: Both are true.
Option 2: Both are false.
Option 3: Statement 1 is true, statement 2 is false.
Option 4: Statement 1 is false, statement 2 is true.
Question : Determination of equilibrium level
Option 1: AD=AS
Option 2: S=I
Option 3: Both A and B
Option 4: Neither A nor B
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