44. Assume that, without taxes, the consumption schedule for an economy is as sh

Question

44.

Assume that, without taxes, the consumption schedule for an economy is as shown in the table below. Impose a progressive tax such that the tax rate is 0 percent when GDP is $100. 5 percent at $200.10 percent at $300.15 percent at $400. and so forth. Determine the new consumption schedule, noting the effect of this tax system on the MPC (tax inclusive) and the multiplier. Instructions: In the table below, enter your answers (except the MPC) as whole numbers. For the MPC. round your answers to 2 decimal places.

Explanation / Answer

GDP CBT Tax % Tax DI CAT MPC 100 120 0% 0 100 100 200 200 5% 10 190 190 0.90 300 280 10% 30 270 270 0.80 400 360 15% 60 340 340 0.70 500 440 20% 100 400 400 0.60 600 520 25% 150 450 450 0.50 700 600 30% 210 490 490 0.40

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