1 point: Spending multiplier = 1/(1 − MPC) = 1/(1 − 0.8) = 1/0.2 = 5
1 point: $60 million × 5 = $300 million
1 point: It would decrease.
1 point: The spending multiplier is 1/(1 − MPC). A fall in MPC increases the denominator, (1 − MPC), and therefore decreases the spending multiplier.
1 point: Decrease it
1 point: $60 million × 1 = $60 million
217