If the Income-Expenditure Multiplier Equals 4 and a 1 Percentage

question 31

Multiple Choice

If the income-expenditure multiplier equals 4 and a 1 percentage point increase in the real interest rate reduces autonomous spending by 100 units, then a 1,000 unit recessionary gap can be eliminated by ______ the real interest rate by ______ percentage points.

• A) increasing; 10.0
• B) increasing; 4.0
• C) increasing; 2.5
• D) decreasing; 2.5

---

Definitions:

Democratic Party

One of the two major political parties in the United States, traditionally associated with liberal and progressive policies.

African American Vote

The electoral participation and voting rights of African Americans, a critical aspect of U.S. civil rights progress.

Allied Debts

The financial obligations incurred by countries allied during wartime, particularly during World War I, owed to other nations and financial institutions.

American Response

The actions or reactions of the United States government, its people, or organizations to domestic or international events, crises, or policies.