Evaluating Fiscal Policy Alternatives

Paper Summary:

The paper provides a summary of a simulation for using fiscal policy tools to manage a fictitious country called Erehwon. The paper relates that government spending and taxation are fiscal policy tools that affect the real GDP and aggregate income of the economy. The paper shows how increases and decreases in government spending and taxes aid in managing recession and inflation. The paper concludes that there are no actions to guarantee optimum results, so policy makers must be flexible and evaluate the effectiveness of fiscal policy changes. The paper also applies these principles to the workplace.

Outline:
Abstract
Effects of Fiscal Policy Changes
Key Fiscal Policy Points
Workplace Application
Growing Further Assessments
Conclusion

From the Paper:

"Fiscal policy is a tool used by federal governments to regulate the economy. This paper provides a summary of a simulation for using fiscal policy tools to manage a fictitious country called Erehwon. Erehwon is a small country with a population of 30 million with an average income of $1,300. The literacy rate is 56% for males and 35% for females. Only11 million individuals are in the labor force and 20% of the population lives below the poverty line. The country suffers from an inadequate infrastructure for transportation, communication and banking services. The government must manage the fiscal tools of government spending and taxation to improve the health of the economy and strengthen the country's infrastructure."

Sample of Sources Used:

• Colander, C.D. (2004). Economics: Aggregate Demand, Aggregate Supply, and Modern Macroeconomics. Chapter 25, p.1-33. The McGraw-Hill Companies, 5e.
• (n.d. 2006) Current Inflation Rates. Retrieved, June 16, 2006 from http://www.inflationdata.com.
• University of Phoenix (2006). Week Three Simulation. ECO 360 - Economics for Business Course Website: https://ecampus.phoenix.edu/secure/resource/resource.aspSourced June 16, 2006.

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