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

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.