Arrange the following statements in sequential order.

(A) Aggregate demand will increase.

(B) Induce the public to borrow more.

(C) Central Bank will decrease the reverse repo rate.

(D) Ex-ante aggregate demand is less than Ex-ante aggregate supply

Choose the correct answer from the options given below:

1. (A), (B), (C), (D)
2. (A), (C), (B), (D)
3. (D), (C), (B), (A)
4. (A), (B), (D), (C)

Option 1 -> Incorrect sequence; starts with the result rather than the problem.

Option 2 -> Incorrect sequence; begins with the result and places statements out of logical order.

Option 3 -> Starts with the economic problem (deflationary gap), followed by monetary policy response, then mechanism, and finally the outcome.

Option 4 -> Incorrect sequence; result comes first and problem comes at the end.

Hence, Option 3: (D), (C), (B), (A) -> This is the correct logical sequence of events in monetary policy response to a deflationary gap: (D) First, there's an economic problem where ex-ante aggregate demand is less than ex-ante aggregate supply (deflationary gap). (C) To correct this, the Central Bank decreases the reverse repo rate (expansionary monetary policy). (B) Lower reverse repo rate makes borrowing cheaper, inducing the public to borrow more. (A) Increased borrowing leads to increased spending, ultimately increasing aggregate demand and correcting the deflationary gap. -> correct