3-2 Simulation Checkpoint Assignment PDF

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Final project checkpoint from module 3, Involving the FED simulation....

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ECO 202 Project Economic Summary Report

Table of Contents 1. 2. 3. 4. 5. 6. 7.

Introduction Fiscal Policies: Taxation Fiscal Policies: Government Expenditure Monetary Policies Global Context Conclusions References Introduction

For the benefit of the incoming administration, I submit this report to document, analyze, and interpret the macroeconomic policy decisions I made as the chief economic policy advisor of Econland. The purpose of this document is to further our national prosperity by deepening our understanding of the relationship between macroeconomic policies and their consequences for our citizens. The report includes a thorough accounting of the major fiscal and monetary policy decisions made over each of the seven years of my term, as well as an explanation of the underlying rationales for those decisions and the resulting impacts of those policies. [Replace this area with Table 3 from your simulation report.]

Table 1.1 The table above summarizes the macroeconomic climate of Econland over my term. For my scenario I chose the “base Case”. As chief economic policy advisor of Econland I tried not to make drastic changes since the economy was do well to start off. Paying close attention to interest rates and government expenditures to try and keep the economy growing and not headed for a recession. Overall, I had a good approval rating averaging a high 70 Fiscal Policy: Taxation

[ Table 2.1 My intent of my taxation policies was to support growth. Keeping in mind free trade and being productive producing economic output. I did not change income and corporate tax much. I left corporate tax at 30% the whole time, but I lowered income tax by only 1% for most of the seven years, returning it to 25% later. Lowering these rates could have possibly hurt job creation and income since it raises the deficit. Keeping it at a consistent rate allowed for safe steady growth.

Looking at The US’s corporate taxation over the last few decades resembles my ideology. Between around 1988 to around 2018 tax rates stayed the same. Like with my scenario, this keeps growth steady and allows well consumption and output to continue as normal. This example validates the macroeconomic because is shows the US along with world averages when it comes to taxing its corporations. Seeing that is a huge source of revenue for countries.

Fiscal Policy: Government Expenditure

Figure 3.1

Figure 3.2 When it came to government expenditure my decision was based on the taxation and government spending. As I mentioned earlier, I did not change taxation much, but I did regulate spending. I tried to increase government spending because it can lead to a more productive economy, producing more output. Increasing spending leads to more income for businesses and households if its at a healthy realistic rate. Looking back, I should have not lowered it when I did. My real GPD fluctuated a bit, but overall grew well. Looking at my government expenditure and real GPD you can see where some of my lowering had a negative outcome. While my unemployment rate was not impressive and stayed average the entire time.

Monetary Policies

Figure 4.1

I tried to keep interest rates low, when it was to low inflation increased since there was too much money being borrowed and or spend. In return I would Have to increase interest rates to fight this and keep it under control. Spending is a good thing but when there is too much money being made it hurts the entire economy. A good example of inflation in the United States comes from the 1970s. Inflation grew to exceed 10%. In 1974, it went from 4.9% in January to 11.1% in December. The Fed raised interest rates to almost 13% by July 1974. Even with these high interest rates the economic growth was slow. This is referred to as stagflation. Causing distress, the US government fell to political pressure and dropped the rate to 7.5% in 1975. This example demonstrates the validity of macroeconomic models by showing the relation of growing inflation rates and slow economic growth. Keeping my inflation rate on average low, helped my approval rating and promote a strong economy Global Context [Insert your responses to the following: Analyze the impacts of openness to trade in general. Why and how are the impacts of monetary and fiscal policies different in a closed economy versus an open economy? Support your claims with specific details from your course reading.] Conclusions [Insert your overall conclusions about the relevance and significance of macroeconomics. Assess the effectiveness of your economic policy decisions. Did your economic policy decisions produce the anticipated results? Did your macroeconomic principles and models behave in ways that you expected? Provide specific examples to illustrate.] [Evaluate how consumer confidence might have impacted the outcomes of your policy decisions for the economy of Econland. Why is consumer confidence a relevant factor for making informed macroeconomic decisions?] References Mankiw, N. G. (2021). Principles of economics (9th ed.). Cengage Learning. Amadeo, K. (2021, May 21). Contractionary Monetary Policy with Examples. The Balance. https://www.thebalance.com/contractionary-monetary-policy-definition-examples-3305829#effectsand-example Khan Academy. (n.d.). How the AD/AS model incorporates growth, unemployment, and inflation (article). Khan Academy. https://www.khanacademy.org/economics-finance-domain/macroeconomics/aggregatesupply-demand-topic/macro-changes-in-the-ad-as-model-in-the-short-run/a/how-the-ad-as-modelincorporates-growth-unemployment-and-inflation-cnx. Tax Foundation. (n.d.). How Do Taxes in the United States Compare? Tax Foundation. https://taxfoundation.org/country/united-states/. Macroeconomics Simulation: Econland. (n.d.). https://forio.com/app/harvard/econland/index.html#results....