In Macroland,the Components of Planned Aggregate Expenditure Are Given By

Multiple Choice

In Macroland,the components of planned aggregate expenditure are given by:
C = 100 + 0.9(Y - T) - 500 r
I = 150 - 1,000r
G = 200
NX = 50
If potential output equals 3,800,net taxes equal 100,and the central bank sets the interest rate to equal 0.05 (5%) ,then the bank must _______ the interest rate to _______ to restore full employment.

A) raise;6%
B) raise;7%
C) lower;4%
D) lower;3%
E) lower;2%