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 achieved when planned spending equals planned output, but it may differ from full employment output due to fluctuations in aggregate demand.

Answer 1

The Correct Option is B

Assertion (A) 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) is also true because the equilibrium level of income may occur below or above the full employment level due to variations in aggregate demand. 
However, Reason (R) does not directly explain Assertion (A) because equilibrium income is based on planned spending and output rather than employment considerations.