6. Assume that, without taxes, the consumption schedule of an economy is as follows. LO31.7 GDP, Billions Consumption, Billions

$100 200 300 400 500 600 700

$120 200 280 360 440 520 600

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.