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3 years ago

D

Business

1 answer:

elixir [45]3 years ago

4 0

Answer: $5,000 in money creation

Explanation:

The money that is created as a result of a new deposit in the financial system can be calculated by using the money multiplier. If this process is to be completed it would take a long time hence making it long term.

The money multiplier is calculated as;

= 1 / Reserve ratio

= 1/ 10%

= 10

The total money created by the deposit is;

= Money multiplier * deposit

= 10 * 500

= $5,000

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