If MPC decreases, what happens to multiplier size?

The formula for the simple expenditure multiplier ($k$) is:

where MPC is the Marginal Propensity to Consume.

The formula shows that the multiplier is inversely related to $(1 - \text{MPC})$. This term $(1 - \text{MPC})$ is also known as the Marginal Propensity to Save (MPS). So, $k = \frac{1}{\text{MPS}}$.

If MPC decreases:

• The value of $(1 - \text{MPC})$ will increase (since a smaller number is being subtracted from 1).
• Since $(1 - \text{MPC})$ is in the denominator of the multiplier formula, an increase in the denominator will lead to a decrease in the overall value of the fraction. Therefore, if MPC decreases, the multiplier size decreases.

Based on the analysis, if MPC decreases, the multiplier size decreases.

The final answer is $\text{a. decreases}$.