Question 6

To find MPC from schedule

Using gradient formulae:

= 520-200
600-400
MPC = 0.8

B ) AFTER TAX
Consumption after tax
Since MPC = 0.8 , the consumption will
be reduced by $ 8 Billion (0.8 x 10
billion tax).
Balance $ 2 Billion is reduction in
Saving.

Cv
$1208
=
$112

After tax

After tax MPC :

MPC = change in consumption
change in income
= 192-112
200-100
= 0.8

Multiplier
Before tax
Multiplier :

After tax
Multiplier :

1MPC
: 5
times

1MPC
: 5
times

$ 8 billion
decrease in
consumptio
n from a $
10 billion
increase in
taxes

<200

200