The cumulative decrease in total spending resulting from an initial decrease in expenditures is equal to the initial decrease multiplied by 1 ÷ MPC.
The cumulative decrease in total spending resulting from an initial decrease in expenditures is equal to the initial decrease multiplied by 1 ÷ (1 - MPC).

Question

Quizplus · Accepted Answer

The correct formula for the cumulative decrease in total spending is the initial decrease multiplied by the spending multiplier, which is 1 ÷ (1 - MPC), not 1 ÷ MPC.

The Cumulative Decrease in Total Spending Resulting from an Initial