Arrange the sequence of events relating to Bank Rate in the proper order.

(A) Loans taken by the commercial banks will become more expensive.

(3) This will decrease the money supply in the economy.

(C) Suppose the Reserve Bank of India increases the Bank Rate.

[D] This reduces the reserve held by the commercial banks.

Choose the correct answer from the options given below:

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

The correct answer is option (1) : (C), (A), (D),(B)

The correct sequence of events relating to the Bank increase is as follows :

1. An increase in the Bank Rate by the Reserve Bank of India. (C)

2. This increase in the Bank Rate makes loans taken by commercial  banks more expensive (A).

3. As loans become more expensive , it reduces the reserve held by commercial banks (D).

4. The reduction is reserves decreases the money supply in the economy (B).

Here's the reasoning behind the order:

1. (C) Suppose the Reserve Bank of India increases the Bank Rate. This is the initial action taken by the central bank.

2. (A) Loans taken by the commercial banks will become more expensive. Since the Bank Rate is the rate at which the central bank lends money to commercial banks, an increase in the Bank Rate makes borrowing from the central bank more expensive for commercial banks.

3. (D) This reduces the reserve held by the commercial banks. To maintain their profitability, commercial banks might be less likely to borrow from the central bank at a higher rate. This can lead to a decrease in the reserves they hold.

4. (B) This will decrease the money supply in the economy. With lower reserves, commercial banks have less money available to lend to businesses and individuals. This contraction in credit creation by commercial banks ultimately reduces the money supply in the economy.