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Income Determination I . The consumption schedule for an economy is C = 50 +0.By. This is an open economy and net X are autonomous
Income Determination I . The consumption schedule for an economy is C = 50 +0.By. This is an open economy and net X are autonomous and so is investment. Recall that in equilibrium mean the amount of domestic output produced (Y) is equal to AE. Calculate the equilibrium level of Y or real GDP for this economy. Assume that without taxes the consumption schedule of an economy is shown below: GDP (Billion $) Consumption (Billion $) 100 120 200 200 300 280 400 360 500 440 600 520 700 600 Graph the consumption schedule and note the size of the MPC. c) Assume now a lumpsum tax is imposed by which of 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 that of the pretax schedule
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