A contractionary fiscal policy in the Mundell-Fleming model (with the flexible exchange rate system) will cause: Question 5 options: shifts both IS and IS* curves to the left; rate of interest falls; demand for Canadian financial assets falls; exchange rate rises; and net exports rise shifts both IS and IS* curves to the left; rate of interest falls; demand for Canadian financial assets falls; exchange rate falls; and net exports rise shifts both IS and IS* curves to the left; rate of interest falls; demand for Canadian financial assets rises; exchange rate falls; and net exports rise shifts both IS and IS* curves to the left; rate of interest rises; demand for Canadian financial assets falls; exchange rate falls; and net exports rise