Fiscal Policy

Essay by bakerboobooUniversity, Ph.D.B+, February 2008

download word file, 4 pages 5.0

Aside from creating and enforcing regulations and laws the government has an important part in encouraging and fostering economic growth. One of the ways that government can manipulate the trends in the economy is called a fiscal policy. A fiscal policy according to Colander is an intentional change made to governmental spending or taxes that leads to either stimulation or a slow down in the economy (2004). The contents of this paper will show and discuss the effects of the changes in fiscal policy in the simulation and will highlight four key points from the reading assignments that were emphasized in the simulation. In addition there will be a discussion on the application of what was learned in the simulation to a familiar organization. Lastly there will be a summary of simulation assessments.

Erehwon Fiscal PolicyIn the first simulation scenario it is year 2xx6 and Erehwon is facing a recession.

Frank Smith is concerned about increasing employment as well as raising public popularity levels. As president I decided to increase government spending for infrastructures by 200 million dollars. Increasing the budget for infrastructures allowed the development of the highly needed public systems that can now link up the different regions of the country. In addition the development of infrastructure is geared towards the skilled labor force that the country has which are construction, engineering, and design. In increasing the budget the unemployment rate went from 6.32% to 4.41%. There was also an increase in government spending on education for low income students. Education is crucial in Erehwon but increasing the budget did not lower unemployment levels because there is a shortage of trained faculty in the country. Furthermore as president I also opted to increase income tax rates. Rates went from 0% to .50%. Increasing tax rates will rake in...