To deal with the inflationary situation in the economy, the Central Bank increases the Cash Reserve Ratio (CRR).

Arrange the following in proper sequence as per their occurrence after increase in CRR :

(A) Decrease in lending capacity of commercial banks

(B) Decrease in aggregate demand

(C) Increase in deposits by commercial banks with Central Bank

(D) Decrease in investment in the economy.

Choose the correct answer from the options given below :

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

The correct answer is option (3) : (C), (A), (D), (B)

The correct sequence after an increase in the Cash Reserve Ratio (CRR) is :

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

Explanation :

(C) Increase in deposits by commercial banks with Central Bank  (due to the higher CRR requirement).

(A) Decrease in lending capacity of commercial banks (as a result of reduced available reserves).

(D) Decrease in investment in the economy (due to reduced lending capacity).

(B) Decrease in aggregate demand (as a result of reduced investment).