If the income-expenditure multiplier equals 2.5 and a 1 percent 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 ________ percent.
A. increasing; 4.0
B. decreasing; 2.0
C. increasing; 2.5
D. increasing; 2.0
Answer: D
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