Arrange the following statements in chronological order with respect to open market operation.

(A) Bonds payments increases total reserves in the economy.
(B) RBI buys government bonds from the market.
(C) RBI sell bond if there is excess money supply.
(D) Higher reserves increase money supply in the economy.

Choose the correct answer from the options given below:

(B), (A), (D), (C)

The correct answer is Option (3) → (B), (A), (D), (C)

(B) RBI buys government bonds from the market. This is the initial action in open market operations when the RBI wants to inject liquidity into the banking system.

(A) Bonds payments increases total reserves in the economy. When RBI buys bonds, it pays money to commercial banks, thereby increasing their reserves.

(D) Higher reserves increase money supply in the economy. With more reserves, banks can lend more, which increases the overall money supply through the money multiplier.

(C) RBI sells bonds if there is excess money supply. Later, if there is too much money supply, RBI may act to absorb excess liquidity by selling bonds.