Suppose the Reserve Bank of India raises the policy repo rate. Consider the following likely consequences:
1. Banks' cost of borrowing short-term funds from the RBI rises.
2. Inflationary pressure in the economy tends to moderate over time.
3. The Cash Reserve Ratio of all banks rises automatically.
Which of the above is/are likely consequences?
- A1 only
- B1 and 2 only
- C2 and 3 only
- D1, 2 and 3
Correct answer: B