REASON-ASSERTION BASED QUESTIONS
(Guideline) Choose the correct alternative from the following in each question 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 Reason (R) is true
(1) Assertion (A): In an economy, if consumption expenditure is high, the investment multiplier will be below.
Reason (R): The velocity by which money changes hands, determines the growth of an economy.
Ans. (d) Assertion (A) is false but Reason (R) is true
(2) Assertion (A): During a deflationary gap, actual aggregate demand is more than potential aggregate demand to maintain full employment.
Reason (R): Recession in an economy leads to falling in demand as compared with supply.
Ans. (b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)
(3) Assertion (A): A country always tries to balance the BoP,i.e. balance in the current account equals balance in the capital account.
Reason (R): Balance BoP indicates stable economics relation with the rest of the world
Ans. (a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
(4) Assertion (A): Currency held by the public is a monetary liability of the central bank
Reason (R): Central bank controls credit, whereas commercial banks create credit with the currency held by the public.
Ans. (b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)
(5) Assertion (A): The currency notes do not carry as much value in I as is denominated, still has general acceptance
Reason (R): Currency notes are backed by a legal promise from the central bank and central government of the country.
Ans. (a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
(6) Assertion (A) Higher-income groups have a lower propensity to consume, as compared with lower-income groups.
Reason (R) Consumption expenditure can never be zero even when a person doesn’t have any income.
Ans. (b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)
(7) Assertion (A): Depreciation of domestic currency leads to improvement in the balance of trade.
Reason (R): When the exchange rate rises, domestic goods become cheaper in the international market.
Ans. (a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
(8) Assertion (A) Tax is the main source of government revenue that is used to provide services therefore those who pay tax should not use government services.
Reason (R) Public goods are non-exclusive and non-rival in consumption.
Ans. (d) Assertion (A) is false but Reason (R) is true
(9) Assertion (A) Central bank as a banker to the government, works as a financial adviser.
Reason (R) Government borrows internally from banks and the general public
Ans. (c) Assertion (A) is true but Reason (R) is false.
(10) Assertion (A) Government budget is an annual estimated statement of revenue and expenditure during the coming fiscal year.
Reason (R) Through the government budget, tries to reduce the regional variations.
Ans. ( b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)