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 foreign price level decreases

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