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Single Answer MCQ
Q-00015843

What is a potential consequence for a bank if it has a low reserve ratio?

1

High equity

2

Limited loan disbursement

3

Increased risk of insolvency

4

High liquidity

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Sandeep Chaturvedi

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Answer and Solution

Answer

C. Increased risk of insolvency

Solution:

If a bank has a low reserve ratio, it faces the increased risk of insolvency, especially if many depositors withdraw funds simultaneously.

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