A borrower comes into the bank and pays off 100 Rupees of his loan. This was a cash payment by the borrower to the bank. What will the bank do because of this loan repayment?

Both A and B

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Neither A nor B

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Make new loans of 100 Rupees

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Keep the 100 Rupees as reserves

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Solution

The correct option is C
Make new loans of 100 Rupees

In order to maximise profits, as quickly as possible the bank will make new loans totalling 100 Rupees, the amount of the excess reserves.

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A borrower comes into the bank and pays off 100 Rupees of his loan. This was a cash payment by the borrower to the bank. What will the bank do because of this loan repayment?

The correct option is C Make new loans of 100 Rupees In order to maximise profits, as quickly as possible the bank will make new loans totalling 100 Rupees, the amount of the excess reserves.

The correct option is C
Make new loans of 100 Rupees

In order to maximise profits, as quickly as possible the bank will make new loans totalling 100 Rupees, the amount of the excess reserves.