Question

Bank A Assets Liabilities & Net Worth Reserves $20 Deposits $120 Bonds $10 Borrowing $40 Loans $230 Net Worth $100 Bank B Assets Liabilities & Net Worth Reserves $10 Deposits $150 Bonds $30 Borrowing $20 Loans $260 Net Worth $130 Suppose that there are only two banks in the United States (so that all the banking rules and regulations pertain to the U.S.). The tables above show the balance sheets of these two banks at a point in time. The required reserve ratio equals zero percent.

Answer 1

When someone pays back the loan owed to the bank,it amount under loans in its balance sheet decrease by the same amount.

This amount is added to the reserves until bank decides to lend,invest or replay its dues otherwise

Unless bank decides to do something with the amount in it got back by loan repayment all parameters except reserves remain constant.

Deposit=$120

Borrowing=$40

Net worth =$100 this also doesn't change since deduction in loans is cancelled by increase in reserves

Reserves=20+10=30$

Bonds=$10

Loans=230-10=$220