Single Answer MCQ
Q-00045413
Which of the following statements about bank loans is true?
1
Banks only issue loans to large corporations.
2
Banks can lend out most of the deposits while maintaining a small reserve.
3
Each loan given reduces the bank's overall liquid assets.
4
Banks cannot charge interest on loans.
Answer and Solution
Answer
B. Banks can lend out most of the deposits while maintaining a small reserve.
Solution:
Banks lend out most of the deposits they receive while keeping a small percentage as reserves to cover withdrawals, allowing them to fuel economic activity through loans.
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