Running Head: EVALUATING FISCAL POLICY ALTERNATIVES SIMULATION
Fiscal Policy Simulation
During the course of the simulation different aspects of Fiscal Policy were examined and altered to bring about equilibrium in the budget for the country. In an ideal situation one can alter one indicator to bring about the desired change in another and balance the budget or keep the budget deficit to a preset level. However, life is not usually ideal and the ideal percentage to increase or decrease spending in certain areas is not known. So, by examining historical data and calculating the present situation by the “best-known multiplier” the government tries to keep recession or inflation at bay.
During the first year of office the government increased the amount of money being spent on the infrastructure of the country. Because there was a lack of transportation development, waterfront/port development and other important trade related development, the interest of other countries to invest in this country was not present. By developing infrastructure a country will invite import and export options with other countries which will entice those countries to invest in the economy.
The second area of increased expenditure was education. By increasing literacy and higher education the people of Erehwon are able to meet the demand which modern business asks of employees. By investing in the people the government is investing in the economic health of Erehwon.
The effects of changes made was to stimulate the economy and invest in the people, thereby increasing the viability of Erehwon by bringing business and investing to the country from othe ...