Respuesta :
the additional money created is 0.25 x $1000 = $250 so add that to the deposit: $1000 + $250 =$1250 created
According to the Money Multiplier theory, the central bank can change the supply of money to the economy by changing the reserve requirements.
What do you mean by Money Multiplier?
The total amount of money in a commercial bank is created, in general, the number of stocks multiplied by a set amount of central bank money (multiplier).
If banks do not have excess deposits, the total withdrawal amount is the same as the repayment deadlines. Theoretically, banks will never have a surplus.
[tex]\rm\,money \; multiplier = 1/ r \\\\ \rm\,money \; multiplier = 1/0.25\\\\ \rm\,money \; multiplier = 4\\\\(r = reserve \;requirement)[/tex]
So, if I know that the multiplier rate is 4, then if the central bank creates the reserve requirement at 0.25 then the amount that will be kept as reserve will be 0.25 multiplied by 1000 which is $250.
Thus, the total amount of money that can be created will be a multiplier multiplied by 1,000 which is 4*1,000 = $4,000.
To learn more about money multiplier, refer:
https://brainly.com/question/4412587
