Assertion (A): When the economy is not in equilibrium, ex post output differs from the sum of ex post consumption and ex post investment.
Reason (R): Output that is not sold shows up as unintended accumulation of inventories, which is counted in ex post investment.
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (A) is false but (R) is true.
Assertion (A): When the economy is not in equilibrium, ex post output differs from the sum of ex post consumption and ex post investment. — False. Even out of equilibrium, actual Y equals actual C + I. The accounting identity always holds.
Reason (R): Output that is not sold shows up as unintended accumulation of inventories, which is counted in ex post investment. — True. Unsold output is counted in ex post investment as unintended inventories.
NCERT (2026-27): “4.2 Determination of Income in Two-sector Model … Thus even though planned Y is greater than planned C + I, actual Y will be equal to actual C + I, with the extra output showing up as unintended accumulation of inventories in the ex post I on the right hand side of the accounting identity.” |