Single Answer MCQ
Q-00015839
What happens when a borrower repays a loan with interest?
1
Deposits reduce
2
Bank profits decrease
3
Banks lend more
4
Cash reserves increase
Answer and Solution
Answer
C. Banks lend more
Solution:
When a borrower repays a loan with interest, banks obtain additional money, which can then be used to provide more loans to other borrowers, hence increasing lending capacity.
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