In the Monetary Small Open-Economy Model with a Flexible Exchange

question 55

Multiple Choice

In the monetary small open-economy model with a flexible exchange rate, an increase in the domestic money supply increases

• A) domestic output, but has no effect on the domestic price level or the nominal exchange rate.
• B) the domestic price level, but has no effect on domestic output or the nominal exchange rate.
• C) the nominal exchange rate, but has no effect on domestic output or the domestic price level.
• D) the domestic price level and the nominal exchange rate, but has no effect on domestic output.
• E) the domestic price level and domestic output, but has no effect on the nominal exchange rate.