ECO 202 3-2 Simulation Checkpoint Assignment
Ashley Marie Allen
Southern New Hampshire University
June 10, 2021
Professor Michael Tasto
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.
Table 1.1
Table 3: Economic Environment, Decisions, and Results
This table summarises the Decisions and Results of your game.
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Global Economic Growth Forecast 2.4 2.4 2.8 2.0 1.6 1.0 1.3
2.0
Consumer Confidence Index 100.0 100.0 102.3 100.5 99.5 98.7 98.5 101.0
Interest Rate % 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0
Income Tax Rate % 24.0 24.0 24.0 24.0 24.0 24.0 24.0 24.0
Corporate Tax Rate % 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0
Government Expenditure US$ (in billions) 30.0 30.0 30.0 30.0 30.0 30.0
30.0 30.0
Real GDP Growth % 2.5 1.0 3.1 1.4 0.9 1.9 0.9 2.0
Unemployment Rate % 5.0 5.6 5.4 5.2 6.1 5.9 5.9 5.8
Inflation Rate % 2.0 2.0 1.0 1.4 1.7 0.4 0.8 0.8
Budget Surplus (Deficit) as % of GDP -3.0 -2.1 -1.0 -0.2 0.5 1.1
1.5 2.2
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 did not try
to change drastically, given that the economy was good at the beginning. Pay attention to interest
rates and government expenses to ensure that the economy continues to grow rather than
recession. I nevertheless have an average approval rating high of 69.
Fiscal Policy: Taxation
Table 1: Real GDP and Its Components
This table shows the various components of Gross Domestic Product
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Consumption 55.0 59.6 59.0 73.6 78.1 91.4 99.4 104.3
Government Expenditure 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0
Investment 15.0 15.4 16.2 18.4 19.4 22.0 22.5 24.2
Exports 25.0 25.7 26.5 27.1 28.2 29.3 30.7 32.3
Imports 25.0 27.0 26.5 33.1 34.4 39.5 41.6 42.3
Nominal GDP 100.0 103.7 105.2 115.9 121.2 133.2 141.0 148.5
Real GDP 100.0 101.2 101.0 111.5 110.6 115.9 120.9 122.1
Table 2.1
I was committed to supporting growth in my tax policies. Take into consideration free
trade and productive economic output. I changed corporate income and taxes. The company
began 30% and fell 14% in year 3, but increased to 20% in year 4. At the end of the year,
corporate tax increased to 24%. Reduced rates could have damaged the creation of jobs and
earnings since the deficit was increased. To maintain it at a consistent rate, safe steady growth is
possible.
Fiscal Policy: Government Expenditure
I think it may result in a more productive economy, producing more output if I've tried to
increase government spending. Increased expenditure will lead to increased revenues for
companies and households if they are at a healthy realistic rate. Real GDP growth began at 2.5%
and then fell to 1.4% in year 3 and then fell to 0,9% in year 4, and shrank again in year 6, then
rose from 7% to 2.0% in year 6. How to get Econland out of recession, I didn't know. I believe
the inflation rates decreased every year, when I raised the interest rate. My real GDP has
fluctuated a little, but overall it has grown.
The unemployment rate began at 5.0% and rose at Year 2 to 5.4%, but decreased at Year
3 to 5.2%. Then in year 7 the unemployment rate rose to 5.8%. That was because of the recession
in Econland. Unemployment typically increases when companies are reduced or shut down, but
the degree of interruption can vary.
Monetary Policies
I have maintained an interest rate at 3.0% and a low inflation rate. Not a lot of money was
borrowed or spent. The same help retained control of the interest rate. Spending is good but it
hurts the entire economy if there is too much money.
The 1970s showed a good example of inflation in the U.S. Inflation has increased by
more than 10%. In 1974, in January it went from 4.9% to 11.1% in December. By July 1974, the
Fed increased its interest rates to nearly 13%. The economic growth was slow, even with these
high interest rates. This is called stagflation. The U.S. government dropped to political pressure
as a result of distress and in 1975 dropped the rate to 7.5%. The validity of macroeconomic
models is shown in this example, which demonstrates the link between increasing inflation and
slow economic growth. The average low rate of my inflation has helped me to approve it and
promote a strong economy.
