Let's represent the tax system by writing tax revenue as T = T0 + t.Y, where T0 and t

are parameters of the tax code. The parameter t is the marginal tax rate: if income rises by $1,

taxes rise by t x $1. You are required to answer the following questions of the government of

Corona before they can adopt your suggestions:

(a) How does this tax system change the way consumption responds to changes in GDP?

(b) In the Keynesian cross, how does this tax system alter the government-purchases multiplier?

Compare it with the prevailing case of lumpsum taxes .

(c) In the IS-LM model, how does this tax system alter the slope of the IS curve? Compare it

with the prevailing case of lumpsum taxes