A Classical IS-LM Model of the World Economy Can Be

Multiple Choice

A classical IS-LM model of the world economy can be used to show that in a flexible exchange-rate system,a temporary increase in government purchases will cause

A) output and the real interest rate to rise, which reduces net exports but has an ambiguous effect on the real exchange rate.
B) output and the real interest rate to rise, which increases net exports but has an ambiguous effect on the real exchange rate.
C) output to rise and the real interest rate to fall, which reduces net exports and causes the exchange rate to depreciate.
D) the real interest rate to fall, which causes the exchange rate to rise, which reduces net exports.