In the Mundell-Fleming Model, If the Economy Is Operating at or Below

Multiple Choice

In the Mundell-Fleming model, if the economy is operating at or below the natural level in the short run, then in the long run the price level will fall, the exchange rate will ______, and net exports will ______ to restore the economy to its natural rate.

A) appreciate; increase
B) appreciate; decrease
C) depreciate; increase
D) depreciate; decrease