Fiscal Policy Simulation

Paper Summary:

This paper discusses the concept of fiscal policy and how it relates to the management of a national economy. The economic indicators of GDP, GDP growth, and employment are examined in relation to their estimation of an economy's health. Fiscal policies that allow manipulation of an economy are also examined, such as government spending on infrastructure, spending on education, and governmental policies on taxation.

From the Paper:

"The changes to fiscal policy in the simulation had immediate and long-lasting effects on the economy of Erehwon. During periods of high or runaway inflation the government is obligated to cut spending across the board where possible. As President, such spending cuts on infrastructure and education programs are never popular, either with the public or other political representatives who have to face their constituents with the news of program cuts. During recessionary periods, the government was forced to spend itself out of recession and, if not congressionally blocked, to run a higher than average deficit. While the public may be happy with the results the long-term effect on the economy of such measures are not positive. Additionally, during a recession taxes should be reduced."

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