1. **State the problem:** The commercial banking system has a required reserve ratio change from 20% to 30%, and it is $60 million short of reserves. We need to find by how much the money supply must decrease if no additional reserves can be obtained. 2. **Relevant formula:** The money supply change is related to the reserve change by the money multiplier: $$\text{Money Multiplier} = \frac{1}{\text{Required Reserve Ratio}}$$ 3. **Calculate the money multipliers before and after the change:** - Initial reserve ratio $r_1 = 0.20$, so money multiplier $m_1 = \frac{1}{0.20} = 5$ - New reserve ratio $r_2 = 0.30$, so money multiplier $m_2 = \frac{1}{0.30} \approx 3.33$ 4. **Interpretation:** The banking system is short of reserves by $60$ million, meaning it must reduce loans and deposits to meet the new reserve requirement. 5. **Calculate the decrease in money supply:** The decrease in money supply $\Delta M$ is the shortfall in reserves multiplied by the money multiplier corresponding to the new reserve ratio: $$\Delta M = \text{Reserve Shortfall} \times m_2 = 60 \times 3.33 = 199.8 \approx 200$$ 6. **Final answer:** The money supply must decrease by approximately $200$ million. **Answer: (c) 200 million**