You deposit $3,000 in currency into your checking account at Elmo's Bank, which has no excess reserves. The required reserve ratio is 20%.

a. Use a T-account to show the initial effect of this transaction on Elmo's Bank balance sheet.

b. Suppose Elmo's Bank makes the maximum loan it can from the funds you deposited. Use a T-account to show the initial effect of granting the loan on Elmo's Bank balance sheet.

c. What is the maximum increase in checking account deposits that can result from your deposit? What is the maximum increase in the money supply? Briefly explain.