GDP, Bithione $100
200
300
400
500
600
700
Consumption, Bio
$120
200
280
360
440
520
600
c. Now suppose a proportional tax with a
10 percent tax rate is imposed instead
of the regressive tax. Calculate and
graph the new consumption schedule,
and calculate the MPC and the
multiplier
d. Finally, impose a progressive tax such
that the tax rate is 0 percent when
GDP is $100, 5 percent at $200, 10
percent at $300, 15 percent at $400,
and so forth. Determine and graph the
new consumption schedule, noting the
effect of this tax system on the MPC
and the multiplier
e. Use a graph similar to Figure 13.3 to
show why proportional and
progressive taxes contribute to greater
economic stability, while a regressive
tax does not