6. Assume that, without taxes, the consumption schedule of an economy is as follows. LO11.7

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.

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GDP, Billions Consumption, Billions $100 $120 200 200 300 280 400 360 500 440 600 520 700 600