Instructions:
Macro Simulation (Links to an external site.)
(Links to an external site.)Links to an external site.
(It is at http://www-01.glendale.edu/mmaier/macropolicy/ (Links to an external site.) )
This time you will play the simulation in two different scenarios.
A. For inflation scenario, choose “Fiscal and Monetary Policy”
Run the simulation again until you are satisfied with the results remembering that you will face trade-offs.
What were the main problems in the economy when you started? How well did you resolve those problems? What problems remain? Why did those new problems occur (explain using economic theory)?
For the first year in the simulation, describe your thought process in choosing each of the fiscal and monetary policy numbers. If some numbers are larger than others, or some positive and some negative, explain why. If you left a policy at zero, explain why.
Then choose another year in which your fiscal and monetary policies were different from the policies described in question 2. Explain each of the fiscal and monetary policy choices in this year.
B. Choose a new scenario (not depression or inflation). Then choose “Fiscal and Monetary Policy with random shocks”
What were the main problems in the economy when you started? How well did you resolve those problems? What problems remain? Why did those new problems occur (explain using economic theory)?
Choose one year from each run of the scenario. Describe your thought process in choosing each of the fiscal and monetary policy numbers. If you changed your numbers, explain why you did so. If some numbers are larger than others, or some positive and some negative, explain why. If you left a policy at zero, explain why.
1. In this assignment when you used the simulation to design policies during inflation, which monetary policies did you choose? For each policy explain how it could reduce inflation? (If the policy did not reduce inflation, that’s okay. Explain why it did not work.)
2. In this assignment when you used the simulation to design policies during inflation, which fiscal policies did you choose? For each policy explain how it could reduce inflation? (If the policy did not reduce inflation, that’s okay. Explain why it did not work.)
3 Given an economy with the following statistics, what is the best monetary policy it should follow and explain why
Unemployment 8%; Inflation 3%; Prime interest rate 6%; real GDP growth 1%
