Question

Arrange the followings in a correct order.
(A) Employment and income come down.
(B) Investment demand comes down.
(C) Demand-pull inflation rate comes down.
(D) Repo rate or policy interest rate rises.

• A. (A), (B), (C), (D)
• B. (D), (C), (B), (A)
• C. (D), (B), (A), (C)
• D. (C), (D), (B), (A)

Hint:

How are repo rates related to the business cycle?

Answer 1

The Correct Option is C

An increase in the central bank's *repo rate* reduces investment demand, which in turn lowers employment and income.

Consequently, *demand-pull inflation* declines.

Thus, the accurate sequence is (D), (B), (A), (C). Therefore, (c) is the correct answer.