Step 1: Gravitational force relation.
The acceleration due to gravity \( g \) on the surface of the earth is given by:
\[
g = \frac{GM}{R^2}
\]
where \( G \) is the gravitational constant, \( M \) is the mass of the earth, and \( R \) is the radius.
Step 2: Effect of change in radius.
If the radius \( R \) decreases by 1%, then \( g \) will increase, as gravity is inversely proportional to the square of the radius. The percentage increase in \( g \) is approximately 2%.
Thus, the correct answer is (2).