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
