Read the following statements - Assertion (A) and Reason (R):
Assertion: Macroeconomics USUALLY allows simplified analysis of how total production is related to prices in an economy by focusing on single imaginary commodity.
Reasoning: 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.
From the given alternatives choose the correct one:

Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

Option 1: Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

Here's why:

Assertion (A): Macroeconomics often uses a simplified model with a single imaginary commodity to analyze the relationship between total production and prices in an economy. This is because it allows economists to focus on the general trends and avoid the complexities of individual markets.

• Reasoning (R): In many cases, changes in prices, interest rates, wages, and profits tend to move in the same direction across different sectors of the economy. For example, if there is a general increase in demand, it will likely lead to higher prices, interest rates, wages, and profits across the board (with some variations depending on specific factors).

Reasoning (R) explains why macroeconomics can use a simplified model.

• While there can be exceptions and variations between different sectors, the general tendency for prices, wages, etc. to move together allows economists to use a single good as a representative for the entire economy. This simplifies the analysis and makes it easier to understand broad economic trends. It's important to note that macroeconomic models are simplifications and may not capture all the nuances of a real economy. However, the reasoning provided highlights a key justification for using a single imaginary commodity in macroeconomic analysis.

NCERT Text: 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 Assertion is correct).

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 (Reasoning is correct). Particularly, when these attributes start changing fast, like when prices are going up (in what is called an inflation), or employment and production levels are going down (heading for a depression), the general directions of the movements of these variables for all the individual commodities are usually of the same kind as are seen for the aggregates for the economy as a whole.