Final answer:
The correct answer to the payment between two customers of different banks and its impact on their balance sheets is that assets of one bank decrease and liabilities of the other bank increase. This occurs because the paying bank loses reserves, while the receiving bank has an increase in its deposits.
Step-by-step explanation:
When a payment is made between two customers in different banks, the balance sheets of the involved banks are affected. To understand the changes, it's important to recap what constitutes a bank's assets and liabilities. A bank's assets include reservable funds, loans, and their ownership of bonds. The liabilities are largely made up of customer deposits. Bank capital is equivalent to the bank's net worth, which is calculated by subtracting its liabilities from its assets.
Considering the question, the correct answer is: Assets of one bank decrease and liabilities of the other bank increase. Here's why: When a customer from Bank A transfers money to a customer at Bank B, Bank A's assets decrease because it has to transfer reserves to Bank B. Meanwhile, Bank B's liabilities increase because it now owes more to its customer, who has received the funds.
Payment processing between banks typically involves the central bank or a clearing house, which adjust the reserve balances of each bank accordingly. The transaction does not directly affect the coins and currency in circulation as it's an electronic transfer of funds.