Which of the following is true concerning the effects of a monetary expansion in an economy with perfect capital mobility?

 

A) The increase in the money supply will neither affect domestic interest rates nor exchange rates, which will remain constant

B) The increase in the money supply will cause domestic interest rates to rise, causing the domestic currency to depreciate

C) The increase in the money supply will cause domestic interest rates to fall 

D) The increase in the money supply will not have any impact on interest or exchange rates

E) It will be  leading to the depreciation of the domestic currency.