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

Question 57

Multiple Choice

 Gross Domestic Product (GDP)   Consumption (C)  $0$40100120200200300280400360\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, we can conclude that
The tax


A) enhances the economy's built-in stability.
B) reduces the economy's built-in stability.
C) neither increases nor decreases built-in stability.
D) increases the MPC and therefore increases the size of the multiplier.

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