Introduction
High budget deficit, taxation, fighting off inflation and economic recession are all factors that influence the everyday affairs for governments of our countries. The purpose of this paper is to provide a summary of the Fiscal Policy simulation, demonstrating the fiscal policy tools used to manage a fictitious country called Erehwon, where I am elected as president of the country. As we see in the simulation, government has an important role to play in keeping the economy in a posture of growth, while dealing with inflation and recession. This paper will also show how government spending and taxation are fiscal policy tools that affect the real GDP and aggregate income of the economy. Any increases or 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.
Effects of changes in Fiscal Policy
In the presidential elections of 2005, I was elected president of Erehwon for a four-year term. As president I have been tasked to make the necessary decisions of fiscal policy to continue the development of my country and encourage economic growth to fulfill its long-run potential income and out. With the help of my vice president, a 30 year veteran in public finances and economics and my budget director, chief adviser on matters relating to fiscal policy, I'll begin the journey of evaluating the effectiveness of changes in government spending, Inflation, and taxation. The country faces the issues typical of most developing countries, achieving economic growth, restraining go ...