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What do banks do with the remaining amount after keeping reserves?

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Question

What do banks do with the remaining amount after keeping reserves?

Options

  • Lend the remaining amount to earn interest

  • Issue the remaining amount as currency

  • Use the remaining amount as Reserve Ratios

  • Keep the remaining amount as foreign exchange reserves

MCQ
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Solution

Banks lend the remaining amount to earn interest. At the same time, they retain enough reserves for withdrawal demands.

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