Answer Happy

Assume that without taxes, the consumption schedule for Bahrain economy is as shown below. (note: all figure in Bahrain Dinar) GDP, Billions Consumption, Billions 100 180 300 240 500 300 700 360 Required: a Calculate the size of Marginal Propensity to consume b. Assume that the lump-sum (regressive) tax of BD 20 billion which imposed at all levels of GDP Calculate the tax rate at each level of GDP and put in table the resulting consumption schedule and compare the MPC and the multiplier with those of the pretax consumption schedule C. Now suppose a proportional tax with a 20% tax rate is imposed instead of regressive tax Calculate and put in table the new consumption schedule d. Finally, impose a progressive tax such that the tax rate is 15% when GDP is BD100, 20% at BD300,25% at BD 500 and 30% at BD 700. Calculate and put in the table the new consumption schedule noting the effect of this tax system on the MPC (tax inclusive) and the multiplier