What is the value of the MPC? 0.8 b. Assume now that a lump-sum tax is imposed such that the government collects $10 billion in taxes at all levels of GDP. Add the after- tax consumption to the table below. Answer is complete but not entirely correct. Consumption, Before Tax, Billions Lump-SumTax, Billions Consumption, After Tax, Billions GDP, Billions 100 120 10 1100 200 200 10 190 X 300 280 10 270X 400 360 10 350 X 500 440 10 430 X 600 520 10 510X 700 600 10 590 X Compare the MPC and the multiplier with those of the pretax consumption schedule. MPC after tax = 0.8 Multiplier after tax = 0.8 0 The MPC and multiplier are:

What is the value of the MPC? 0.8 b. Assume now that a lump-sum tax is imposed such that the government collects $10 billion in taxes at all levels of GDP. Add the after- tax consumption to the table below. Answer is complete but not entirely correct. Consumption, Before Tax, Billions Lump-SumTax, Billions Consumption, After Tax, Billions GDP, Billions 100 120 10 1100 200 200 10 190 X 300 280 10 270X 400 360 10 350 X 500 440 10 430 X 600 520 10 510X 700 600 10 590 X Compare the MPC and the multiplier with those of the pretax consumption schedule. MPC after tax = 0.8 Multiplier after tax = 0.8 0 The MPC and multiplier are:

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Instructions: In the table, enter your answers as a whole number. Round your answers for the MPC and the multiplier to 1 decimal
place.
What is the value of the MPC?
0.8
b. Assume now that a lump-sum tax is imposed such that the government collects $10 billion in taxes at all levels of GDP. Add the after-
tax consumption to the table below.
Answer is complete but not entirely correct.
Consumption,
Before Tax,
Billions
Lump-SumTax,
Billions
Consumption,
After Tax,
GDP, Billions
Billions
100
120
10
1101
200
200
10
190 X
300
280
10
270 X
400
360
10
350 X
500
440
10
430
600
520
10
510
700
600
10
590
Compare the MPC and the multiplier with those of the pretax consumption schedule.
MPC after tax =
0.8
Multiplier after tax =
0.8
The MPC and multiplier are:
higher before the tax.
higher after the tax.
the same before and after the tax.

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