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If the Income-Expenditure Multiplier Equals 4 and a 1 Percentage

Question 22

Multiple Choice

If the income-expenditure multiplier equals 4 and a 1 percentage point increase in the real interest rate reduces autonomous spending by 100 units, then a 1,000 unit recessionary gap can be eliminated by ______ the real interest rate by ______ percentage points.


A) increasing; 10.0
B) increasing; 4.0
C) increasing; 2.5
D) decreasing; 2.5

Correct Answer:

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