In the New Keynesian open economy model, government spending A) is an

In the New Keynesian open economy model, government spending

A) is an effective stabilization tool with a flexible exchange rate, and an ineffective stabilization tool with a fixed exchange rate
B) is an ineffective stabilization tool with a flexible exchange rate, and an effective stabilization tool with a fixed exchange rate; prices are flexible.
C) is an ineffective stabilization tool with a flexible exchange rate, and an ineffective stabilization tool with a fixed exchange rate; net exports depends on the relative price of foreign goods to domestic goods.
D) is an effective stabilization tool with a flexible exchange rate, and an effective stabilization tool with a fixed exchange rate.

ANSWER

B