Assertion (A) Total production is equal to total consumption in case of circular flow in a two-sector economy
Assertion (A): Total production is equal to total consumption in case of circular flow in a two-sector economy.
Reason (R): Household sector supplies factor services only to firms and the firms hire factor services only from households.
Choose the correct alternative among those given below
(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 and 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 Rason (R) is True.
Anurag Pathak Changed status to publish November 22, 2023
Solution:-
Ans – (b)
Explanation:-
The money value of total production is equal to total consumption in case of circular flow in two sector economy as savings are zero. Thus Assertion is true.
As there are only two sectors Households and firms, thus firms hire factors of production from households only. Thus Household is true.
But Reason (R) does not explain the Assertion (A) and is not the correct explanation.
Anurag Pathak Changed status to publish November 18, 2023
