The government of Osiris believes in balancing its budget over a seven-year cycle. Over the first six years, it has maintained its spending at $180 billion and its MTR at 0.25. (There are no autonomous taxes in Osiris). Column 2 of the table below shows the level of GDP in each of the first six years in the cycle.

a. Complete the table below. Round your answers to nearest whole number.

(1) Year	(2) GDP ($ billion)	(3) Tax Revenue ($billion)	(4) Government Spending ($billion)	(5) Deficit/Surplus
1	720		180
2	670		180
3	650		180
4	730		180
5	740		180
6	755		180

Suppose that the estimated level of GDP in Year 7 is projected to be $700.

b. What level of government spending (assuming no change in the tax rate) for the government of Osiris to end the seven-year cycle with its budgetary goal on target?

Government spending would have to be $  .

c. Alternatively, what should the new tax rate be (assuming no change in government spending) for the government of Ran to end the seven-year cycle with its budgetary goal on target? Round your answer to 2 decimal places.
 Tax rate should be changed to  %.

Answer rating: 100% (QA)

Solution Year GDP billion Tax revenue billion Government spending billion Deficit surplus 1 720 180 ... View the full answer