Problem: 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.
GDP (billions)....................Consumption (billions)
.......100..........................................120
.......200..........................................200
.......300..........................................280
.......400..........................................360
.......500..........................................440
.......600..........................................520
.......700..........................................600