A Permanent Increase in the Domestic Money Supply

Multiple Choice

A permanent increase in the domestic money supply

A) must ultimately lead to a proportional decrease in E, and, therefore, the expected future exchange rate must rise proportionally.
B) must ultimately lead to a proportional decrease in E, and, therefore, the expected future exchange rate must decrease proportionally.
C) must ultimately lead to a proportional rise in E, and, therefore, the expected future exchange rate must rise proportionally.
D) must ultimately lead to a proportional rise in E, and, therefore, the expected future exchange rate must rise more than proportionally.
E) must ultimately lead to a proportional rise in E, and, therefore, the expected future exchange rate must rise less than proportionally.