Which of the following pairs is correctly matched?

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → Accounting identity – ex post output always equals ex post consumption plus ex post investment

The accounting identity uses actual, ex post values. Ex post output is always equal to ex post consumption plus ex post investment.

Option (1) Ex post investment – the addition to her stock that a producer plans to make in a year — Incorrect. What a producer plans to add to her stock is ex ante investment. Ex post is what actually happens.

Option (2) Ex ante supply – equals ex ante demand at every level of output that producers plan — Incorrect. Ex ante supply equals ex ante demand only in equilibrium.

Option (3) Equation Y = A + cY – holds at every level of output, whether or not the market is in equilibrium — Incorrect. Y = A + cY holds only when the market is in equilibrium.

Option (4) Accounting identity – ex post output always equals ex post consumption plus ex post investment — Correct. This holds at all times, because unsold goods show up as unintended inventories in ex post investment.

NCERT (2026-27): “4.2 Determination of Income in Two-sector Model … A word of caution is in order. The term Y on the left hand side of equation (4.3) represents the ex ante output or the planned supply of final goods. On the other hand, the expression on the right hand side denotes ex ante or planned aggregate demand for final goods in the economy. Ex ante supply is equal to ex ante demand only when the final goods market, and hence the economy, is in equilibrium. Equation (4.3) should not, therefore, be confused with the accounting identity of Chapter 2, which states that the ex post value of total output must always be equal to the sum total of ex post consumption and ex post investment in the economy. …”