If MPC = 2/3, a decrease in government purchases of $10 billion will ultimately lead to:

Name: If MPC = 2/3, a decrease in government purchases of $10 billion will ultimately lead to:
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The marginal propensity to consume (MPC) is 2/3, meaning for every dollar decrease in income, consumption decreases by 2/3 of a dollar. The multiplier effect is 1/(1-MPC) = 1/(1-2/3) = 3. A $10 billion decrease in government purchases would lead to a $30 billion decrease in aggregate demand due to the multiplier effect.

If MPC = 2/3, a Decrease in Government Purchases of $10