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.
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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: Feb 20, 2025
- 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.
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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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