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(Solved): Assume that, without taxes, the consumption schedule for an economy is as shown in the first two col ...
Assume that, without taxes, the consumption schedule for an economy is as shown in the first two columns of the table below. Assume that a lump-sum (regressive) tax of $10 billion is imposed at all levels of GDP.
A: Calculate the tax rate at each level of GDP. Enter the amount of the tax, disposable income, consumption after tax, and the tax rate in the table. Instructions: For tax, disposable income, and consumption after tax, enter your answers as a whole number. For the tax rate, round your answers to 2 decimal places.
B. Compare the MPC and the multiplier with those of the pretax consumption schedule. Instructions: Enter your answers for MPC rounded to 1 decimal place and enter your answers for the multiplier as a whole number.
1. MPC for the lump-sum tax consumption schedule
2. MPC for the pretax consumption schedule
3. Multiplier for the lump-sum tax consumption schedule
4. Multiplier for the pretax consumption schedule
Expert Answer
Assume that, without taxes, the consumption schedule for an economy is as shown in th