Question

Read the following statements: Assertion (A) and Reason (R). Choose the correct alternative from the options given below:
Assertion (A): When the allocative function is performed well, scarce resources are allocated to those firms which have the highest productivity for the economy.
Reason (R): Allocative function allocates or directs funds into their most productive investment opportunity.

• 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, but Reason (R) is \textbf{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.

Hint:

Allocative function = Right funds to the right hands — it's how finance boosts productivity in the economy.

Answer 1

The Correct Option is A

Financial markets facilitate the allocation of capital to businesses or sectors where it can be utilized most effectively. When this process functions optimally, it boosts the economy by directing investments toward the most productive enterprises, thereby enhancing total economic output. Consequently, both statements are accurate, and the Reason accurately substantiates the Assertion.
Final Answer: (A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).