Assume the required reserve ratio is 20 percent. If the Reserve bank buys R80 million in government securities from the public, then the money supply will immediately:

increase by R80 million, and the maximum money-lending potential of the commercial banking system will increase by R80 million.

increase by R80 million, but the maximum money-lending potential of the commercial banking system will decrease by R80 million.

increase by R80 million, and the maximum money-lending potential of the commercial banking system will increase by R400 million.

decrease, because the securities are an asset to the commercial banks and a liability to the Reserve bank.