If the Income-Expenditure Multiplier Equals 4, and a 1 Percent

Multiple Choice

If the income-expenditure multiplier equals 4, and a 1 percent 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 ________ percent.

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