The assertion (A) states that in the year 2000, the limit on foreign exchange for current account transaction heads was decreased. On the other hand, the reason (R) claims there was also a decrease in foreign currency assets.

Option 1 is correct because both A and R are correct statements, and R does indeed explain A. A decrease in foreign currency assets could prompt a country to reduce the ceiling on foreign exchange in an attempt to preserve those assets. The cause-effect relationship in this scenario shows how the drop in foreign currency assets (R) can explain the reduction in the ceiling on foreign exchange (A).

Options 2, 3, and 4 are incorrect. Option 2 contradicts the cause-effect relationship present in the question. Options 3 and 4 are incorrect because both A and R are true statements, not just one or the other.