Suppose a person who is developing a card game crowdfunds $40,000 and holds this as cash for future expenses. If this $40,000 comes from donors' checking accounts, by how much will the money supply fall if the reserve ratio is 10 percent?
A. The Money Supply will decrease by $___.
I've tried 4000, 40000, 36000, 44000, 400000, and everything else you can think of. Someone please help answer this!

According to the given details, the money supply will decrease by $400,000

Money supply

Money supply refers all the currency and other liquid instruments in a country's economy on the date measured.

Given,

Suppose a person who is developing a card game crowdfunds $40,000 and holds this as cash for future expenses.

Here we need to find the decreasing rate in money supply.

While we looking into the given question, we have identified the following values,

Account balance = $40,000

Reserve ratio = 10%

Now, the decreasing rate is calculated as,

Decrease rate = Account balance[1/reserve ratio]

Now, we have to apply the values on the formula, then we get

Decrease rate  = 40000[1/0.10]

When we simplify it, then we get the decrease rate as,

Decrease rate =  $400,000

Therefore, the money supply will decease by $400,000.

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