In an Economy in Which Planned Aggregate Expenditure Is Given

Multiple Choice

In an economy in which planned aggregate expenditure is given by PAE = 5,500 + 0.6Y - 20,000r,the central bank is currently setting the interest rate at 0.05 (5%) .If potential output equals 10,750,the central bank must ________ the interest rate to ________ to restore full employment.

A) lower;3%
B) lower;4%
C) raise;6%
D) raise;7%
E) raise;8%