In the Mundell-Fleming model of the SR small open economy (with completely sticky goods prices) under a fixed exchange rate regime, if there is pressure in the foreign exchange market for the exchange rate to go below the fixed exchange rate,

I. the domestic monetary authority will intervene in the foreign exchange market by buying domestic currency and selling foreign currencies .

II. the LM* curve will endogenously shift to the left (in the e-Y space).

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.