Consider the Mundell-Fleming model of the SR small open economy (with completely sticky goods prices), if the domestic real interest rate happens to be below the world real interest rate, which of the following will happen?

I. Domestic currency will appreciate in value.

II. The IS curve in the r-Y space will shift to the right until r=r*.

Select one:

A.

Only I is true.

B.

Only II is true

C.

Both I and II are true

D.

Neither I nor II is true.