Directions: In the questions given below are two statements labelled as Assertion (A) and Reason (R). In the context of the two statements, which one of the following is correct?
Assertion (A): Net increase in aggregate demand in the economy generates its own multiplier effect.
Reason (R): When the government collects additional tax revenue and spends it, the aggregate demand in the economy increase by a smaller amount.
1
Both (A) and (R) are true and (R) is the correct explanation of (A)
2
Both (A) and (R) are true, but (R) is not the correct explanation of (A)
3
(A) is true, but (R) is false
4
(A) is false, but (R) is true