The FED buys $100 million of bonds from the public and lowers the required reserve ratio. What will happen to the money supply? Explain.

The $100 million used for purchase of bonds tend to increase the monetary base, which in turn leads to increase in money supply. By lowering the reserve requirement will make the money multiplier to increase, leading to rise in the money supply. The Fed's purchase of $100 million of bonds that will rise the monetary base and the dropping of the required reserve ratio that rises the multiple expansion amount and raises the money multiplier, will lead to increase in money supply.