Question

Statement 1: Ex-post savings and Ex-post investments are equal at all level of income.

Statement 2: Under the effective demand principle, the equilibrium output is equal to ex-ante Aggregate Demand (AD). 

In the light of the given statements, choose the correct alternative from the following:

विकल्प

• Statement 1 is true and Statement 2 is false.

• Statement 1 is false and Statement 2 is true. 

• Both Statements 1 and 2 are true.

• Both Statements 1 and 2 are false.

Answer 1

Both Statements 1 and 2 are true.

Explanation:

1. Statement 1: Ex-post saves and ex-post investments are always equal since they assess economic outcomes after the fact. This equivalence is a fundamental principle of macroeconomic accounting.
2. Statement 2: The equilibrium output is governed by the concept of effective demand, which holds that ex-ante aggregate demand (AD) equals total planned production. Therefore, this assertion is also true.