Bance Solida has, in the past, always operated with a reserve ratio of 25 percent. It has now been taken over by Gung-Ho Bank Which operates with a reserve ration of 12½ percent, Assuming that Banca Solida adopts the business practices of its new owner, What will be the effect on money supply in the country in which Banca Solida operates ?

• A. Money supply will increase because Banca Solida will increase its loans
• B. The effect on money supply cannot be determined from the information given
• C. Money supply will decrease because the loans will have to be repaid
• D. Money supply will be unchanged because the central bank has made no policy changes