I'd typically reply to things which are going on in my character's vicinity if he'd notice it or not, or if someone says something when my character is around, then i'd make a comment on it, if it was in my character's personality, or if someone walked up to my character or where he was and said a general comment like "hi everyone" i'd reply to them. Again it depends on how your character would react to what's going on around them.
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