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

Multiple Choice

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

A) the nominal exchange rate to increase in proportion with the money supply.
B) the nominal exchange rate to equal the real interest rate.
C) the nominal exchange rate to decrease.
D) the nominal exchange rate to remain unchanged.
E) the nominal exchange rate to increase faster than the money supply.