"Even in free market economies, governments have an important role to play in keeping the economy on the growth path, and dealing with inflation and recession." The fiscal policy simulation was offered to provide the students with an environment in which to make fiscal policy decisions and study the outcomes. The purpose of this paper is to explain the effects of changes in fiscal policy, identify four key points presented in the simulation, apply the lessons to the workplace, and describe the growing further results. After reading this paper, the audience should understand how the simulation enables the user to better comprehend government uses tools in fiscal policy to put the economy back on track.
Effects of Changes in Fiscal Policy
What were the effects of the changes in fiscal policy in the simulation? In the first scenario of the simulation, Frank, the Director of the Budget Office, states, "We have to increase jobs in the economy and improve overall confidence in the future of the economy."
Keeping this in mind, I opted to increase government spending on infrastructure by $300 million, decrease spending on education by $100 million, and reduce income tax rates by 0.5%. The effects of fiscal policy in the simulated year of 2xx6 shrank the unemployment rate from 6.32% to 4.62% and improved popularity from a score of 3.2 to 3.68. For this scenario, the changes in fiscal policy brought positive results to the economy of Erehwon. (See Table 1.)
The second scenario begins with the announcement of an inflationary problem in the economy. The scenario specifically states, "In the fourth year of office it has been decided to use fiscal policy measures to bring inflation down, which means reducing incomes in the economy." I decided to cut government spending on education by $600 million and...