If the Income-Expenditure Multiplier Equals 2

question 58

Multiple Choice

If the income-expenditure multiplier equals 2.5 and a 1 percentage point increase in the real interest rate reduces autonomous spending by 200 units, then a 1,000 unit expansionary gap can be eliminated by ______ the real interest rate by ______ percentage points.

• A) increasing; 2.5
• B) increasing; 4.0
• C) increasing; 2.0
• D) decreasing; 2.0

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Definitions:

Metal

A class of elements characterized by their malleability, conductivity, and metallic luster, typically solid under standard conditions.

Electrolysis

The decomposition of a chemical compound or metals caused by an electric current.

Separating Elements

Components or techniques used in systems and processes to divide, isolate, or detach different substances or parts.

Electrically

Pertaining to or operated by electricity; involving, derived from, or related to electricity.