Monetary policy will have an impact on interest rates, whether it is in the form of an adjusted federal fund rate or the direct sale/call of securities to banks (changing the amount of money in circulation). If the fun rates raise or securities are sold, then interest ratse will rise. If fed fund rates decline or securities are called then interest rates will decline.
Monetary policy has direct and indirect affects on exchange rates. The direct affects are ...
This solution provides some insight into the impacts of domestic monetary policy on interest rates, exchange rates, and foreign trade.