In a Certain Economy,the Components of Planned Aggregate Expenditure Are

Multiple Choice

In a certain economy,the components of planned aggregate expenditure are given by:
C = 60 + 0.6(Y - T) - 1,000r
I = 200 - 1,000r
G = 200
NX = 50
If potential output equals 1,025,net taxes equal 100 and the central bank sets the interest rate equal to 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%