Consider the balance sheet of the following bank.

                                             Chase

        ------------------------------------------------------------------------------

        Reserves          3000            Checkable Deposits              5000

        Loans              7000            Savings and Time Deposits    8000

        Bond Holdings   4000           Equity                                1000

Suppose that the reserve ratio for checkable deposits equals 0.10 and the reserve ratio for savings and time deposits equals 0.03.

       

Show all balance sheet steps, as covered in class and on the power point slides, of Chase making a loan of $2000. Provide a brief explanation for each step and assume that the loan check is re-deposited in another bank. How much does M2 change as a result of the move? How much does the monetary base change as a result of this move? After answering the previous questions and without providing any more balance sheets, briefly sketch how multiple expansion would apply to this situation.