Part 1 - Practice- Use the balance sheet for Leon's Bank below to answer the following questions. Leon's Bank Assets Liabilities Required reserves $1,000 Demand deposits $10,000 Excess reserves $ 0 Owner's equity $10,000 Customer loans $8,000 Government securities (bonds) $7,000 Building and fixtures $3,000 1. Based on Leon's Bank's balance sheet, calculate the required reserve ratio. 2. Suppose that the Federal Reserve purchases $5,000 worth of bonds from Leon's Bank. What will be the change in excess reserves immediately after the purchase? 3. What will be the change in demand deposits immediately after the purchase in question #2? 4. Calculate the maximum amount that the money supply can change as a result of the $5,000 purchase of bonds by the Federal Reserve. 5. When the Federal Reserve purchases bonds, what will happen to the price of bonds in the open market? 6. Suppose instead that an individual deposits $5,000 of cash into her checking account. What is the immediate effect of the cash deposit on the M1 measure of the money supply? 7. What is the dollar value of the bank's required reserves after the $5,000 deposit in question #6? 8. What is the dollar value of the bank's excess reserves after the $5,000 deposit in question #6? 9. Calculate the maximum amount that the money supply can change as a result of the $5,000 deposit in question #6. 10. Assume instead that a customer withdraws $2000 from Leon's Bank. Identify two different options the bank has to meet the reserve requirement