If the MPC = 0.60,the total change in spending resulting from an initial $500 decrease in aggregate spending will be
A)$300.
B)$800.
C)$1,250.
D)$833.

Name: If the MPC = 0.60,the total change in spending resulting from an initial $500 decrease in aggregate spending will be A)$300. B)$800. C)$1,250. D)$833.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

The spending multiplier is calculated as 1/(1-MPC), which is 1/(1-0.60) = 2.5. The total change in spending is the multiplier times the initial change, so 2.5 * $500 = $1,250.