Fiscal Policy Simulation

Essay by shanbananaA+, April 2006

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This memo will summarize the fiscal policy simulation that was taken for week three of Economics 360. The memo will also answer the questions of what the effects of the changes in fiscal policy were in the simulation. As well as the four key points from the reading assignments that were emphasized during the simulation and how to apply what was learned to the workplace, and lastly the results of the growing further from the assessment.

The effects of the changes in fiscal policy in the simulation varied. The simulation gave the income level and the multiplier. By going through the simulation it was easy to see how government spending can affect other aspects such as taxation. Utilizing the fiscal policy tools allowed bringing the economy back on track. Also, depending on the decision that was made could bring popularity up or down.

Cause and effect seemed to be a big role during the simulation.

There cannot be a decision made without something else being affected. When making decisions it was important to understand how the long run aggregate supply curve and the aggregate demand curve worked. The aggregate demand curve shows real income or output of the economy. The vertical line PO showed the potential output level of the economy. When the aggregate demand curve intersected with the supply curve then the economy was at the potential level.

The four key points learned in the simulation were judging the multiplier, aggregate demand curve, fiscal policy, and GDP.

Applying this simulation to my current workplace is not easy since I do not make these decisions. Although, I do understand now better understand why decisions and cutbacks are made. This also reinforced why there is the need for more funding from tax payers within the city of Spokane.

The growing...