If Exchange Rates Are Flexible and Capital Is Perfectly Mobile

Multiple Choice

If exchange rates are flexible and capital is perfectly mobile, money expansion will lead to

A) an immediate adjustment in the exchange rate, but a gradual adjustment in prices
B) an immediate change in competitiveness
C) a decrease in interest rates and a capital outflow in the short run
D) a proportionate increase in money, prices, and the exchange rate in the long run, leaving output and real money balances unchanged
E) all of the above