If the marginal propensity to consume (MPC) is 4/5, a decrease in government purchases by $10 billion, other things constant, will ultimately lead to a:

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The marginal propensity to consume (MPC) is the proportion of an additional dollar of household income that is used for consumption. If MPC is 4/5, then the multiplier (1/(1-MPC)) is 1/(1-4/5) = 5. A decrease in government purchases by $10 billion would lead to a $50 billion decrease in aggregate demand (10 billion * multiplier of 5), as each dollar decrease in spending leads to a multiplied decrease in the overall economy.

If the Marginal Propensity to Consume (MPC) Is 4/5, a Decrease