Evaluating Fiscal Policy Alternatives - 1270 Words

Evaluating Fiscal Policy Alternatives simulation Principles of Macroeconomics Evaluating Fiscal Policy Alternatives simulation Introduction Fiscal policy is whenever the government changes government spending or taxation as a means of influencing the market economy. This change takes place to stimulate or to restrain inflation. Fiscal policy is the manipulation of trends in the economy by the government. The content of this paper will discuss the effects of the changes in fiscal policy based on the evaluating fiscal policy alternatives simulation. Well Ruled The first part of the simulation for the year 2xx6 showed the decision made was â€Å"well ruled†. The fiscal policy decision made this year will have an impact on the†¦show more content†¦The simulation shows the first item to address is to reverse fiscal decisions. Ideal President The last part of the simulation for the year 2xx8 shows the decisions selected were the result of the â€Å"Ideal President†. The simulation showed the decisions made successfully handled the conditions in the economy and put the economy on the right track. The decisions made will lead to the real gross domestic product of the economy moving closer to the economy’s long-run potential output. During the year of 2xx8 defense spending on social welfare programs was decreased by $200 million. The income tax rate was increased by one percent. This will increase income tax revenues by $200 million. The budget deficit is 2.52 percent of the gross domestic product. The decisions made in the simulation increased popularity to 3.35. The policies chosen will lead to s real gross domestic product of $41.12 billion. Inflation will be at five percent and unemployment will be at 4.46 percent. The simulation shows once the multiplier and the long-run potential output is known a determination is made to follow a contractionary fiscal policy or an expansionary policy. 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