ECO 202 Project

Economic Summary Report

 Table of Contents

1. Introduction

2. Fiscal Policies: Taxation

3. Fiscal Policies: Government Expenditure

4. Monetary Policies

5. Global Context

6. Conclusions

7. References

Introduction
 For the benefit of the incoming administration, I submit this report to document, analyze, and

interpret the macroeconomic policy decisions I made as the chief economic policy advisor of Econland.

The purpose of this document is to further our national prosperity by deepening our understanding of

the relationship between macroeconomic policies and their consequences for our citizens. The report

includes a thorough accounting of the major fiscal and monetary policy decisions made over the seven

years of my term, as well as an explanation of the underlying rationales for those decisions and the

resulting impacts of those policies.

Table 1.1

The table above summarizes the macroeconomic climate of Econland over my term. As

Econland's Senior Economic Policy Advisor, I undertook the stagnation simulation. I was impressed with

my overall execution and approval ratings. During my tenure, I managed to maintain a progressively high

approval rating, concluding with 85 points. During my tenure, I managed to keep my GDP growth rates,

consumer confidence index, and unemployment rate in good positions with little fluctuations in

performance.
 Fiscal Policy: Taxation

Table 2.1

During my 7-year tenure, I opted for a taxation system centered on the gradual reduction of

income tax while at the same time affecting low corporation tax. Higher taxes negate the GDP growth,

while meager taxes limit the GDP growth. The gradual lowering of taxes enhanced public optimism and

encouraged increased spending. The increased spending would culminate in companies making more

money since production increases, leading to employment. As a government, we must promote

increased aggregate demand when reduced as such propels production and subsequently increase

employment opportunities

One historical application of tax cuts to stimulate consumption is the 1964 tax cuts by the

President Kennedy administration. The administration suggested a policy of tax cuts that encompassed

investment tax credits. The impact of such policy was enhanced consumer spending, which ultimately

led to increased production and employment levels (Romer & Romer, 2007). On the other hand, the
investment tax credit culminated in firms receiving tax breaks whenever they undertook new capital

investments. Higher capital investment tremendously impacts an economy's production capability over

time (Mankiw, 2021). The policy combined a short-term increase in production via increased aggregate

demand and a long-term objective of enhancing production via enhanced aggregate supply. The

resulting impact was robust economic growth.

Fiscal Policy: Government Expenditure

Figure 3.1

Figure 3.2
 It is common knowledge and understanding that government spending levels have to be aligned to

aspects related to revenue collection, such as interest rates, income, and corporate taxes. My administration had

opted to lower taxes; hence I had to make increased government spending to keep the budget balanced. An

increase in government expenditure stimulates aggregate demand, which can impact interest rates and thus cause

reduced investments, hence the need to achieve a balanced approach towards such spending (Fetter, 2019). Over

1 billion dollars significantly increased government spending to boost the stagnated economy and ensure

continuous upward economic growth without negatively impacting other aspects of the economy.

During my tenure, the unemployment rate fluctuated, reaching its lowest levels towards the final years of

my administration. Such was boosted by a proportional increase in government spending, which ultimately

inspired the economy and encouraged the creation of new jobs. The Standard accepted level of unemployment is

5%; hence during my tenure, I managed to keep unemployment levels for most of the period under this rate (5%).

The highest level of unemployment was in year two at 5.6% and year three at 5.3%, while in the other years, the

rates were under the natural level. Unemployment is under 5% was propelled by increased aggregate supply,

resulting in increased aggregate demand, creating more jobs. Overall, increased spending and reduced

unemployment rates resulted in GDP growth.

Monetary Policies
 Figure 4.1

Lowering the interest rates allowed the public to access loans that they could use to increase

investments and spending, resulting in increased consumption rates and an increase in GDP. Generally,

interest rates impact the cost of borrowing over time; hence reduced interest rates offer inexpensive

borrowing, enabling individuals to consume and invest more (). The impact of the low-interest rate for

the country (Econland) in the international market was reduced exchange rates. Overall, my resolutions

positively impacted the economy as the real and nominal GDP increased during my tenure.

Us treasury uses the federal funds rate as a primary monetary tool to manage inflationary

pressures. In the past, in the mid-1990s, the Federal Reserve saw a possible inflation increase and

decided to act prior by adopting a contractionary monetary policy (Husted et al., 2020). Such a policy

restricts the amount of funds and credit available in the market. It ensures interest rates hold inflation

from rising during my tenure when the inflation rates began rising. During this period, the Federal

Reserve viewed the risk of inflation and decided to increase interest rates by 280 basis points from 3% in

1993 to 5.8% in 1995. The outcome of this policy was preventing inflationary increase, hence increasing

public morale on economic growth.

Global Context

Investments and savings play a crucial role in any country's economic growth, especially in the

long run. According to Mankiw (2021), an open economy "interacts freely with other economies around

the world," while a closed one "does not interact with other economies around the world." Limited

interaction in a closed economy limits growth in the long run as there are no imports or exports, which

are considered crucial components of a GDP for an open economy alongside government spending,

investment, and consumption. A closed economy does not achieve those essential elements of the GDP,
hence negating the GDP. Monetary policies contrast in these two economies due to their trade

differences.

According to Mankiw (2021), fiscal policies strongly influence growth, investment, and savings,

while at the same time being more impactful on the aggregate demand for commodities and services in

the economy in the short run. But since savings and investment are equal in a closed economy, such

does not have a significant impact. But on the other hand, changes in interest rates due to monetary

policies will impact exchange rates in an open economy, impacting net exports. The impact of monetary

policies in a closed economy is insignificant as such an economy does not engage in any international

trade, hence no effect because of interest rate changes.

Conclusions

Any economic undertaking in the economy stans to impact millions of people. Therefore, we

must understand the various macroeconomic concepts and know how economic issues associate and

affect each other. I believe that during my 7-year tenure, my monetary policy strategies were efficient

and constructive and provided a broader understanding of the outcomes. [Insert your overall

conclusions about the relevance and significance of macroeconomics. Assess the effectiveness of your

economic policy decisions. The GDP of my economy significantly and steadily improved during my

tenure due to the macroeconomic policies I undertook. Despite the increase in inflation towards the end

of the term, the economy still performed well and did not slip into recession. My objective was to

enhance the Econland economy, and I believe I achieved such.

The consumer confidence during my tenure was above 100, signifying people were impressed

and optimistic about the economy's direction. Consumer Confidence denotes the public's perception of

the economy and its fiscal positions. My CCI averaged between 100 to 101.8 during my tenure. CCI is

crucial in undertaking informed macroeconomic decisions as it provides the direction the public views

the impact of the policies adopted by my administration. Policies like lowering taxes enhance CCI,
resulting in increased consumption and spending rates. Therefore, one can identify the present

economic state and future prospects by knowing the CCI.

References

Fetter, F. A. (2019). The principles of economics, with applications to practical problems. Good Press.

Harvard Business Publishing Education. (2021). Macroeconomics simulation: Econland. Harvard

Business School Publishing. https://forio.com/app/harvard/econland/index.html#dashboard

Husted, L., Rogers, J., & Sun, B. (2020). Monetary policy uncertainty. Journal of Monetary
 Economics, 115, 20-36.

Mankiw, N. G. (2021). Principles of economics (9th ed.). Cengage Learning.

Romer, C. D., & Romer, D. H. (2007). Do tax cuts starve the beast: The effect of tax changes on

government spending. https://www.nber.org/papers/w13548

[Add other citations as needed in APA format].