Contemporary Economic Policy and the Virtual Chancellor Simulation

1072 words 5 pages
Contemporary Economic Policy
Assignment: Virtual Chancellor

The Virtual Chancellor Simulation is a web site designed to give to anyone the power to control for a moment the keys of the economic growth model of hisher country and try according to them, by changing the suitable parameters, to lead the economy to its own prosperity.
However it is not an easy thing to be in that position, because you have to take under consideration a lot of variables and risks and you have to satisfy every level of the society, from the poor families and pensioners to the rich people and of course the goals set by the government.
After running the model approximately three hundred times to see what changes each parameters have and what they
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First to keep the expenditures low I cut from defense spending 45%. Later on I increased health spending by 13%, education spending 7% law and order spending 6.I added on those changes an increase to the basic interest rate from 4.75 to 4.80.
As a result those changes gave the expected outcome desired. I cut total Government spending by 0.82% and Current Spending by -0.40%.Now GNP was increased by 0.84 bn even though inflation is up, it is only by a small amount of 0.15 points. Those changes kept the exchange rate index stable and unchanged.
I achieved to decrease Government dept by 0.03% and the same time decrease by 0.04 % the current account deficit.
However those changes affected only macroeconomic variables and not individual households.
To achieve the final target I decided to cut taxes in VAT on domestic fuel from 8.0 to 5.0 and decrease saving rate from 20 % to 18 %.I n average a gain of 0.48 € was contributed. As a greater result is the decrease on unemployment and the stable levels of government borrowing, total government debt, and GDP. However the only matters that can be pointed out is in the long-term period a slightly decrease in the Growth of GDP.
The effects of those changes in my opinion meet the expectations to the overall economy and to all levels of society however are not the ideal for the


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