This analysis is based on computer simulations provided by Biz/ed’s virtual economy, an online model based on the one used by HM Treasury. The virtual economy enables experiments with economic policies and demonstrates impacts on several macro- and microeconomic factors.
In 2010, the British government announced the goal to reduce government spending for areas other than health and overseas aid by an average of nineteen per cent over four years thereby aiming to reduce Britain’s deficit and provoking sustained economic growth. To investigate the impacts of such a policy, the virtual economy model will be applied to demonstrate effects on the economy when government spending is reduced by ten per cent.
Table of Contents
List of Figures
1. Introduction
2. Decrease of Government Expenditure by ten per cent
2.1. National Income
2.2. Economic Growth
2.3. Unemployment
2.4. Inflation
2.5. Government Borrowing and Debt
2.6. Exchange Rate
3. Additional Policies
3.1. National Income
3.2. Economic Growth
3.3. Unemployment
3.4. Inflation
3.5. Government Borrowing and Government Debt
3.6. Exchange Rate
4. Conclusion
Bibliography
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