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

When the central bank raises the *repo rate*, it leads to a reduction in investment demand, which subsequently causes a decrease in employment and income.

As a result, *demand-pull inflation* falls.

Therefore, the correct order is (D), (B), (A), (C). Hence, the correct answer is (c).