In the Monetary Small Open-Economy Model with a Flexible Exchange

question 55

Multiple Choice

In the monetary small open-economy model with a flexible exchange rate,an increase in the world real interest rate

• A) shifts aggregate demand to the right, increasing output and the real interest rate.
• B) shifts aggregate demand to the left, increasing output and the real interest rate.
• C) has no real effects.
• D) shifts aggregate supply to the right, increasing output and decreasing the real interest rate.
• E) shifts aggregate demand to the left, decreasing output and the real interest rate.

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