Fiscal Policy

Introduction

During week three of Economics 360 at the University of Phoenix I participated in a simulation to demonstrate fiscal policy. During this simulation I discovered several topics relating to what I was learning in the text. Some that I will discuss further are limitations of fiscal policy, either positive or negative, how I relate what I have learned in the simulation and how can I translate that into my work environment.

First, fiscal policy is any intentional change in government spending or taxes to increase or decrease the economy. A couple of advantages that I have learned of fiscal policy are cause and effect, and there seems to be several options to remedy a recession. Having more than one option for an issue as important as the economy is a relief.

Cause and effect seems to play a huge role in fiscal policy, you cannot do one thing without something else being affected.

Stuffing Money in a Mattress

English: Detail from Government. Mural by Elihu Ve...

Fiscal policy

An example of this would be; the government increases spending to try to correct a recession in turn unemployment should go down because there are now more projects and plans that need to be fulfilled.

Having options to make corrections to the economy is a favorable asset. Again using the example to correct a recession the government can either increase spending as mentioned before or the can reduce taxes.

Some key points that I first touched base on in the text and now have a better understanding of because of the simulation are:

· Judging the multiplier

· GDP

· Aggregated Demand

· Aggregated Demand Curve

Judging the multiplier cannot be an easy task, knowing when corrections in the economy are simple, is that ever the case? The GDP is something that my class and I have discussed a lot. The simplest definition of GDP I...