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Graph consumption schedule and determine the mpc

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Reference no: EM131137881

Problem: 1: Suppose that a certain country has an MPC of 0.9 and a real GDP of $400 billion. If its investment spending decreases by $4billion, what will be its new level of real GDP? LO 11.5

Problem: 2: Assume that, without taxes, the consumption schedule of an economy is as follows.

GDP, Billions

Consumption, Billions

$100

$120

200

200

300

280

400

360

500

440

600

520

700

600

a. Graph this consumption schedule and determine the MPC.

b. Assume now that a lump-sum tax is imposed such that the government collects $10 billion in taxes at all levels of GDP. Graph the resulting consumption schedule and compare the MPC and the multiplier with those of the pretax consumption schedule.

Reference no: EM131137881

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