Under a flexible exchange rate regime with perfect capital mobility (Mundell-Fleming model), an expansionary monetary policy by the central bank leads to:

The sequence of events in the Mundell-Fleming model is as follows. An increase in the money supply shifts the LM curve to the right, and the domestic interest rate falls below the world interest rate r*. With perfect capital mobility, investors move their funds abroad, where the return is higher, so there is a capital outflow. To send funds abroad they sell the domestic currency and buy foreign currency, and the domestic currency depreciates. The depreciation makes exports cheaper and imports costlier, so net exports increase and the IS curve shifts to the right. The economy settles at a higher level of output, with the domestic interest rate again equal to r*. Monetary policy is therefore highly effective under flexible exchange rates. Option (A) gives the opposite direction. Option (C) describes the fixed exchange rate regime, where monetary policy is ineffective. In option (D) the IS curve shifts to the right, not to the left. Option (E) is wrong: complete crowding out (of net exports, via appreciation, with r staying at r*) results from a fiscal expansion under flexible rates, not a monetary one. Hence the correct option is (B).