Question

Choose the right option describing the two statements given below.

Assertion(A): There is a circular flow of economic activities of production processes.

Reason(R): The household units provide the production units with factors of production when required.

• A. Both A and R are true and R is the correct explanation of A.
• B. A is false but R is true.
• C. Both A and R are true but R is not the correct explanation of A.
• D. A is true but R is false.

Answer 1

The correct option is A Both A and R are true and R is the correct explanation of A.

The economic activities of the production process are continuous and are known as the circular flow of economic activities. There are two main units in this flow, production units and household units. The production units produce products which the household units purchase. In turn, the household unit provides the requirements for the production unit.