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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