In the Monetary Small Open-Economy Model, a Flexible Exchange Rate

Multiple Choice

In the monetary small open-economy model, a flexible exchange rate insulates the domestic price level from

A) increases in foreign interest rates, but not from increases in foreign price levels.
B) neither real nor nominal shocks from abroad.
C) both real and nominal shocks from abroad.
D) nominal shocks from abroad, but not from real shocks from abroad.
E) real shocks from abroad, but not from nominal shocks from abroad.