The Monetary System End of Chapter Problem For each event described, determine the affect on the monetary base, the money multiplier, and the money supply. a. The Federal Reserve buys bonds using open market operations. I May increase or decrease I Increase Answer Bank [ Increase U [ May increase or decrease H ' Decrease H Incorrect b. The Fed increases the interest rate it pays banks for holding reserves. Decrease Decrease Decrease Increase May increase or decrease No effect Incorrect