The song is "Perfect Timing" by Orba Squara.  According to the Wikipedia page, the album uses instruments such as "mandolin, glockenspiel, accordion, sitar, violin, harmonica, toy pianos, xylophone and ukulele."  Honestly, though, the melody sounds more like it's being played on a hammer dulcimer than a mandolin from where I'm sitting.
Source(s):
http://en.wikipedia.org/wiki/Orba_Squara

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