7. The IS-LM-FE model for an open economy is similar to that for the closed economy. A princi- pal difference is that in the open-economy model, factors (other than output or the real interest rate) that increase a country's net exports cause the IS curve to shift up. Among the factors that increase net exports are a rise in foreign output, an increase in the foreign real interest rate, and a shift in world demand toward the domestic country's goods. Economic shocks or policy changes are transmitted from one country to another by changes in net exports that lead to IS curve shifts.