Final answer:
The purchase of U.S. Treasury securities by the Federal Reserve in the open market increases the monetary base, as it raises the banks' reserves, leading to a potential increase in lending and the overall money supply.
Step-by-step explanation:
When the Federal Reserve purchases U.S. Treasury securities in the open market, the effect on the monetary base is an increase. This is because during such open market operations, the Federal Reserve pays for these securities by adding the amount to the reserves of the banks selling the securities, thus increasing the total reserves within the banking system. As a result, these banks have more money to lend, which typically results in an increase in the overall money supply.
For example, if the Federal Reserve buys $10 million in Treasury bonds from Acme Bank, Acme Bank's reserves on its balance sheet would increase by $10 million. This adds to the bank's ability to provide new loans, which can increase the deposits in the banking system and, through the multiplier effect, the overall money supply will rise.