Refer to the data. 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:

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Answer the question on the basis of the following before-tax consumption schedule for a closed economy:

A.  .8 before taxes and .4 after taxes.
B.  .8 both before and after taxes.
C.  .6 before taxes and .8 after taxes.
D.  .8 before taxes and .6 after taxes.

ANSWER:

B.  .8 both before and after taxes.