The correct answer is D. SQPR.
The Reserve Bank of India (RBI) is the central bank of India. It was established on April 1, 1935, in accordance with the Reserve Bank of India Act, 1934. The RBI is responsible for formulating and implementing monetary policy, regulating the financial system, and issuing currency.
The RBI has taken the risk of allowing a large flow of funds into the economy at a time when the annual rate of inflation is slowly moving up. This is because the RBI believes that the benefits of increased economic activity outweigh the risks of higher inflation.
The RBI’s decision to allow a large flow of funds into the economy is likely to have a number of effects. First, it is likely to lead to an increase in aggregate demand. This will put upward pressure on prices, which could lead to higher inflation. Second, it is likely to lead to an increase in imports. This is because businesses will have more money to spend on imported goods and services. Third, it is likely to lead to an appreciation of the Indian rupee. This is because foreign investors will be more willing to invest in Indian assets when the rupee is strong.
The RBI’s decision to allow a large flow of funds into the economy is a risky one. However, the RBI believes that the benefits of increased economic activity outweigh the risks of higher inflation.
The following is a brief explanation of each option:
- Option A: PRQS. This option is incorrect because it puts the phrase “as measured by the Wholesale Price Index” after the phrase “by allowing a large flow of funds.” This is incorrect because the RBI’s decision to allow a large flow of funds is not measured by the Wholesale Price Index.
- Option B: QSRP. This option is incorrect because it puts the phrase “when the annual rate of inflation is slowly moving up” after the phrase “into the economy at a time.” This is incorrect because the RBI’s decision to allow a large flow of funds is not based on the annual rate of inflation.
- Option C: RSPQ. This option is incorrect because it puts the phrase “by allowing a large flow of funds” after the phrase “the Reserve Bank of India has taken the risk.” This is incorrect because the RBI’s decision to allow a large flow of funds is not a risk.
- Option D: SQPR. This option is correct because it puts the phrases in the correct order. The RBI’s decision to allow a large flow of funds is a risk, but the RBI believes that the benefits of increased economic activity outweigh the risks of higher inflation.