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

Question

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An increase in the world real interest rate will make domestic assets less attractive, leading to a capital outflow. To offset this, the central bank will have to sell domestic currency in the foreign exchange market, which will decrease the money supply and increase the domestic price level. The decrease in the money supply will also lead to a decrease in domestic output.

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