For the following questions, assume that both net unilateral transfers and net factor payments from abroad are equal to 0. Further, let the United States represent the domestic country and Japan represent the foreign country.

Suppose that the United States increases its money supply, which causes its net exports to decrease. What happens in the IS LM F E model for Japan in the short run? If Japanese prices do not adjust, what must decrease to bring the IS LM F E model back to equilibrium in the long run?