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

Multiple Choice

In Econland,the components of planned aggregate expenditure are given by:
C = 500 + 0.75(Y - T) - 500r
I = 300 - 500r
G = 400
NX = 30
If potential output equals 4,680,net taxes equal 40 and the central bank sets the interest rate at 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%