In the short-run, any rise in the real exchange rate, EP /P, will ...

[EAugust]

In the short-run, any rise in the real exchange rate, EP /P, will cause
 
  A) an upward shift in the aggregate demand function and a reduction in output.
  B) an upward shift in the aggregate demand function and an expansion of output.
  C) a downward shift in the aggregate demand function and an expansion of output.
  D) an downward shift in the aggregate demand function and a reduction in output.
  E) an upward shift in the aggregate demand function but leaves output intact.

Question 2

In the 2-factor, 2 good Heckscher-Ohlin model, an influx of workers from across the border would
 
  A) move the point of production along the production possibility curve.
  B) shift the production possibility curve outward, and increase the production of both goods.
  C) shift the production possibility curve outward and decrease the production of the labor-intensive product.
  D) shift the production possibility curve outward and decrease the production of the capital-intensive product.
  E) shift the possibility curve outward and displace preexisting labor.

[EAN94]

Answer to Question 1

B

Answer to Question 2

D