ECO 202 Project Template
Economic Summary Report
Table of Contents
Introduction
Fiscal Policies: Taxation
Fiscal Policies: Government Expenditure
Monetary Policies
Global Context
Conclusions
References
Introduction
The purpose of this report is to chronicle, evaluate, and interpret the macroeconomic policy
choices I made while serving as the senior economic policy adviser of Econland. I am submitting
this report for the benefit of the new government. This document's objective is to contribute to the
growth of our national prosperity by enhancing our comprehension of the connection that exists
between macroeconomic policies and the repercussions such policies have on the people who
make up our country. The study provides an in-depth accounting of the important choices about
fiscal and monetary policy that were taken throughout each of the seven years that I was in office.
Additionally, the report provides an explanation of the underlying rationales for those decisions
as well as the effects that those policies had as a direct result of those decisions.
Table 1.1
During the period that I was serving as the nation's top economic policy adviser, the table that can
be seen above offers a synopsis of the macroeconomic environment that prevailed in Econland at
that time. You can find the table here. I was able to make a few adjustments here and there during
the course of my time to boost certain macroeconomic parameters when it was essential to do so.
This was made possible by the fact that the economy was in a robust position the year before the
commencement of my tenure as governor.
For the duration of my time serving in this capacity, I came to the realization that an increase in
the yearly expenditure by the government would be required in order to maintain a real GDP
growth rate that was satisfactory. One of the errors that I made was that in year 5, I did not boost
real government spending by a significant enough amount in order to maintain real GDP growth
at a pace that was optimal for the situation. I increased the tax rates that firms and individuals are
required to pay in order to ensure that there is an adequate amount of money circulating in the
economy.
This was accomplished without a significant increase in the total amount of money that the
government spends. By making a few very minor adjustments to the levels of government
expenditure and the tax rates that are levied on companies while I was in office, I was able to
maintain the unemployment rate at a level of around 4.5 percent throughout the whole of the
period that I was in office. In addition to real growth in GDP and the ability of firms to acquire
additional resources with which to recruit and educate new employees, a modest increase in
government expenditures has also contributed to the slow drop in the unemployment rate.
This is in addition to other factors, such as real growth in GDP. To ensure that investment and
spending on the side of consumers remained proportional to the growth of the government's
budget, I maintained interest rates within the range of 2.5% to 3.0% during the length of my time
serving in this capacity. During the fifth year of my tenure as Federal Reserve Chair, inflation
reached its highest point ever, which coincided with an increase in consumer spending that
reached an all-time high. This was a direct result of the decision to keep the interest rate at its
current level for an unacceptable extended period of time, which led to inflation reaching its
highest point ever.
The choice that was made to maintain low interest rates also had the effect of maintaining an
unemployment rate that was at a level that was thought to be appropriate. Because there was no
incentive for customers to spend less money, this happened. As a result of my efforts to gradually
increase spending while keeping interest rates at a steady level, the government was able to
continually keep a budget surplus (deficit) while I was in power. I maintained a particular level of
interest rates, which made this possible. As a result of the work I put in, I managed to maintain an
approval rating of 8 on average.
Fiscal Policy: Taxation
Table 2.1
When it came time for me to make decisions about tax policy, I made sure to keep in mind that
interest rates and income taxes should both be maintained at a level that is considered reasonable.
According to the research of N. Gregory Mankiw, this suggests that people will have more
money in their pockets, which should lead to more spending and a bigger economy as a whole.
By increasing the percentage at which companies are taxed, I was able to bring these tax rates
into balance. As can be seen, up until the fifth year, everything went according to plan.
Nevertheless, during that year, we saw the lowest level of consumer confidence while
simultaneously having the lowest proportion of unemployment.
My income and corporate tax rates had an effect, among many other additional consequences, on
the percentage of real GDP that was created. This was one of the numerous extra repercussions
that my tax rates had. When tax rates were greater, the percentage was lower, and vice versa;
however, when tax rates were lower, the proportion was larger. When comparing years with
higher tax rates to those with lower tax rates, the inverse was true. The consumption of the
country reached an all-time high in the last year of the period, reaching 88.8, which was an all-
time high for consumption. This compares to the nation's consumption in the first year of the era,
which was 55. The word "consumption" refers to the buying and using of different products and
services by an individual household.
The value of the assets fluctuated by around 15, with a peak of 15.8 in the final year and a low of
14.8 in the fifth and sixth years combined. The average value of the investments was 15.8. The
value hit its all-time high during the last year of the period. It is clear that the nation originally
gained from my tax policies since they were comparable to those of previous President Richard
Nixon, who also decreased tax and interest rates. It is for this reason that it is clear that the
country profited from my tax policies. Additionally, President Nixon was responsible for the
decrease in both tax rates and interest rates throughout his administration.
You can see that it increased the country's consumption as well as its investments when it was
done in a short length of time, which is exactly what I anticipated it would do and what I was able
to do. My objective was to do this task in the shortest amount of time feasible. When it is carried
out for an excessively extended period of time, as Nixon did, it will result in inflation, which will
eventually lead to a recession. When it is carried out for an excessively extended period of time,
as Nixon did. It will have the same impact even if it is carried out over an abnormally lengthy
period of time, from beginning to conclusion. According to Investopedia, the economic policies
of former President of the United States Richard Nixon were the principal cause of double-digit
inflation in the late 1970s, which finally led to a recession in the United States. Nixon's policies
were implemented during the administration of Richard Nixon. Spending by the government is
the focus of fiscal policy.
Table 3.1
Figure 3.2
The steps that I needed to take in order to arrive at a conclusion weren't difficult for me to figure
out. As issues became more evident to me, I came to the realization that it would be in the best
interest of the people of the nation if I cut the interest rates that were already in place as well as
the income taxes that were being collected. I have the impression that the alterations that I
contributed 6.6% to bringing about came to a conclusion that was favorable for the whole of the
nation. Throughout the duration of the experiment, I was successful in maintaining a level of
government expenditure that was quite steady, which allowed me to keep taxes at a level that
could be considered acceptable.
The increase of the real GDP throughout the years that I was in office was subject to certain
swings from year to year, but by the end, it had reached 114.5, having started at 100. The
previous threshold had been set at 100, so this is an improvement over that. Throughout the
whole of the time period, my unemployment rate ranged anywhere from 4.1% to 6.6%, just as it
did for everyone else's. During the years in which the income tax was at its maximum level, the
unemployment rate was also at its highest point; conversely, the opposite was true during the
years in which the income tax was at its lowest point.
Monetary Policies
Figure 4.1
The reason for the change in interest rates was to ensure that they more correctly reflected the
state of economies all around the world as a whole, and this was also the motive for the change. I
lowered interest rates while the world economy was going down to diminish the effect that it had
on our economy on the assumption that it would promote spending and investment. I did this
when the global economy was going down to lessen the impact that it had on our economy. I
acted in this manner with the hope that it would lessen the impact that it had on the economy of
the whole world. This was carried out at a time when the whole globe was heading in the wrong
direction. When economies all over the globe were moving in the wrong direction, this move was
adopted at a moment when it was necessary to take action.
If you take a look at tables 1.1 and 2.1, you'll see that this did, in fact, assist with all of the
components, including inflation, consumption, investments, GDP, and foreign trade. You can see
this for yourself by looking at those tables. Examining such tables will allow you to verify this
information for yourself. It is not difficult to get to this conclusion on your own when you take
into consideration both of these factors. The lowering of interest rates did, in fact, have the
desired effect of helping the economy of the country as a whole as a result of the consequences it
had. It was successful, particularly when contrasted to the period of Richard Nixon, who
decreased interest rates in an attempt to aid the nation in the process of recovering from the Great
Depression. Richard Nixon's policies were successful.
In an attempt to assist the nation in its recovery from the Great Depression, Richard Nixon
pushed for a reduction in the interest rate. The length of time was eventually what caused the
effect to finally stop, which in turn led to inflation in the double digits, which in turn led to a
recession as a consequence of the chain of events that took place as a result of what took place. I
am unable to claim with absolute confidence that it would have had the same influence on the
country as it did when I ended my position had I kept working over the seven-year mark. This is
because I do not have enough information to make such a statement.
Global Context
When an investigation into the effects that commercial trade has on a nation is carried out, it is
found, as a result of the investigation, that these effects are, for the most part, beneficial; this is
something that is discovered when the research is carried out. This includes a quicker growth rate,
a boost in productivity, and better compensation as a result of an increase in the amount of
alternatives available to choose from. People who make less money stand to gain the most from
trade since it broadens their access to commodities that are often of greater quality and less in
price than those that are accessible to people who make more money.
When a country is successful in the manufacture of a certain item, they have the potential to trade
that good with another country that specializes in something else, which results in the
development of additional jobs and possibilities. This leads to more people being able to find
work.
Conclusions
The field of macroeconomics offers a framework that may be used in order to evaluate both the
potential and the actual resources that are available to an economy. This will, in turn, result in the
discovery of new methods to boost production, which will, in turn, result in the formation of
more work possibilities, which will, finally, result in better remuneration. The choices that were
made about Econland's policies were, in the end, accountable for the outcomes that were
predicted to take place. There was a rise not just in consumer spending but also in company
investment as a direct result of decreases in tax rates as well as reductions in interest rates for
borrowing money. The unemployment rate, which has increased marginally since it was first
reported, must be considered one of the unfavorable effects, assuming there are any unfavorable
effects at all, since it has risen marginally since it was first recorded. In the event that there were
any repercussions at all. The rise in consumer confidence continued year after year, right up until
the global financial crisis. We were successful in bringing it back up after it had fallen due to the
emergency situation. When consumer confidence is low, customers tend to save more money than
they spend, which is a positive sign that the economy may be in danger of experiencing
difficulties in the near future. On the other hand, the reverse is also true. When consumer
confidence is strong, individuals have a greater sense of assurance over their financial situation
and are willing to increase the amount of money they spend.
References
Mankiw, N. G. (2021). Principles of Economics (9th ed.) Cengage Learning.
How Tax Cuts Affect the Economy. (2023, August 21). Investopedia.
https://www.investopedia.com/articles/07/tax_cuts.asp
The Great Inflation of the 1970s. (2023, April 30). Investopedia.
https://www.investopedia.com/articles/economics/09/1970s-great-inflation.asp
