Read the following statements - Assertion (A) and Reason (R):
Assertion (A): In macroeconomics, the analysis of how the country’s total production is related to prices is usually simplified by focusing on a single imaginary commodity.
Reason (R): We generally see that what happens to the prices, interests, wages and profits etc. for one commodity more or less also happens for the others.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
Assertion (A): In macroeconomics, the analysis of how the country’s total production is related to prices is usually simplified by focusing on a single imaginary commodity. — True. Macro uses one imaginary good to stand for all goods.
Reason (R): We generally see that what happens to the prices, interests, wages and profits etc. for one commodity more or less also happens for the others. — True. Prices, wages and profits of different goods tend to move together.
Why R explains A?
If all goods behave alike, one good can stand for all. So economists can study a single imaginary commodity instead of many real ones.
NCERT (2026-27): “Introduction … In macroeconomics we usually simplify the analysis of how the country’s total production and the level of employment are related to attributes (called ‘variables’) like prices, rate of interest, wage rates, profits and so on, by focusing on a single imaginary commodity and what happens to it. We are able to afford this simplification and thus usefully abstain from studying what happens to the many real commodities that actually are bought and sold in the market because we generally see that what happens to the prices, interests, wages and profits etc. for one commodity more or less also happens for the others. …” |