The Accompanying Table Is the Before-Tax Consumption Schedule for a

question 187

Multiple Choice

$$\begin{array} { | c | c | } \hline \text { Gross Domestic Product (GDP) } & \text { Consumption (C) } \\\hline \$ 0 & \$ 40 \\\hline 100 & 120 \\\hline 200 & 200 \\\hline 300 & 280 \\\hline 400 & 360 \\\hline\end{array}$$ The accompanying table is the before-tax consumption schedule for a closed economy. If a lump-sum tax (the same tax amount at each level of GDP) of $40 is imposed in this economy, the marginal
Propensity to consume is

• A) 0.8 before taxes and 0.6 after taxes.
• B) 0.8 both before and after taxes.
• C) 0.6 before taxes and 0.8 after taxes.
• D) 0.8 before taxes and 0.4 after taxes.

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