In the question given below, there are 2 statements marked as Assertion (A) and Reason (R). Choose the correct alternative from the following options.

Assertion (A)- In order to curb deflation in the economy, RBI reduces the repo rate.

Reason (R)- Reduction in the repo rate causes the purchasing power of people to fall and helps in stabilizing deflation in the economy.

(A) Is true but (R) is false.

In order to deal with deflation, RBI uses its monetary tools, and one such tool is the repo rate. When commercial banks require funds for a small period of time, they borrow from the reserve bank of India against approved security. The rate charged for the same is called as repo rate. When the repo rate is reduced, it results in a decreased rate of interest, which eventually encourages citizens to buy more credit and increase their purchasing power. When there is an increase in purchasing power aggregate demand rises and deflation is stabilized in the economy.