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ECO 202 Project Template 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 each of 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 a senior economic policy advisor, I restrained myself from undertaking drastic alterations to the economy as it is performing well. The major point of focus was on interest rates and government expenditure to ensure the economy flows in the right direction and continues to grow. Fiscal Policy: Taxation Table 2.1 The intent of taxation policies I choose is to ensure growth while considering free trade and a productive economy that supports production. Corporate tax remained at 30%, although I lowered the income tax by a marginal 1% for the better part of the seven-year period, and reinstating the 25% rate later. The impact of lowering the two taxes would negatively hurt the income and job creation aspect of the economy, s it increases the deficit. Having a consistent rate allows the economy to grow steadily. The corporate tax rate in the US between 1993 and 2018 has relatively remained the same (at 38%), the same as the approach I used in my corporate tax rates. This ensures steady economic growth and allows consumption and output to continue as usual (Trading Economics, 2019). The US corporate

tax example validates the macroeconomic decision I made as it highlights the country (US) along with global averages regarding taxation of corporations. Fiscal Policy: Government Expenditure Figure 3.1 Figure 3.2 The decision on government expenditure was based on its spending and taxation policies. Tax rates did not change significantly but there was regulation in government spending. Government spending increased due to the fact that it resulted in the economy becoming more productive, thus increasing output (Mankiw, 2021). Increased spending increases income flow for businesses and subsequently households, especially if the increase is within a realistic and healthy rate bracket. The real GDP experienced minor fluctuation, although it saw an overall growth. Unemployment rates stayed in the negative most of the period, thereby posting an unimpressive outlook while the real GDP and government expenditure yielded negative results since I had lowered expenditure. Monetary Policies

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Figure 4.1 The interest rates were as low as possible when the inflation was down to spur economic activities through borrowing and spending of excess cash circulating in the economy. Whenever the inflation rates started rising, I would increase interest rates to manage the situation, because as much as spending is a positive aspect of the economy, it may cause too much circulation of money in the economy thereby increasing inflationary pressures and eventually hurting the economy (Mankiw, 2021). In 1974 when the inflation rates in the US grew past 10%, the Fed decided to raise interest rates close to 13% to curb the inflationary pressure on the economy and slow economic growth (Kramer, 2022). In 1975, due to political pressure, the Fed decided to reduce the rate to 7.5% to help reduce the cost of capital in the economy (Kramer, 2022). This example highlights the validity of macroeconomic models as it shows the association between growing inflation rates and the slowdown in economic growth, thus, in keeping the inflation rates at averagely low levels, the economy of Econ Land became strong thereby helping me get great approval ratings. Global Context Openness to trade denotes the level at which a nation engages in international trade. The effects of openness to trade can entail positive impacts such as an increase in economic growth, lower prices for consumers, and increased productivity. Negative aspects include loss of jobs in particular local industries due to imports and an increase in competition between domestic industries thus pushing some businesses out of work (Mankiw, 2021). In a closed economy, monetary and fiscal policies greatly affect the economy since there is zero international trade to trigger economic undertakings (Mankiw, 2021). Monetary policies refer to undertakings taken by a nation’s central bank to manage money supply and interest rates to realize macroeconomic objectives like full employment and price stability. In a closed economy, alterations in the money supply and interest rates possess a direct effect on a country’s economy since there is zero international trade to offset these impacts. Fiscal policies entail the utilization of taxation and government spending to influence the economy. Under a closed economy, any alterations in government spending and taxation could directly affect the economy because of zero international trade to counter these impacts. For instance, an increase in government spending can lead to higher aggregate demand and subsequent economic growth.

Under an open economy, the effects of monetary and fiscal policies are varied since global trade counters any effects. For instance, if a nation increases its money supply, it might experience increased inflation and if it is open to trade the increase in inflation can be offset by increasing imports as they reduce prices and eventually minimize the inflationary pressures (Mankiw, 2021). If it increases government spending, the level of aggregate demand may increase thus triggering economic growth, but since the nation is open to trade, the increased demand will be countered by an enhanced rate in imports thus helping reduce the effects on domestic industries. Conclusions Macroeconomics plays an important role in shaping the economic environment, and helping policy makers make informed decisions which are essential for enhancing economic growth and stability. The economic policy decisions assessment is based on the effectiveness in realizing the expected outcomes. For instance, the policy directed at lowering unemployment successfully reduced the unemployment rate, thus making the policy effective. The macroeconomic models and principles gave mixed results. For instance, the principle of multiplier effect which entails an increase in government expenditure can result to enormous increases in national income, thereby if the government spends more the national income can increase more than proportionately giving anticipated results but if other aspects such as consumer confidence are low, the multiplier effect will be minimal than expected. Consumer confidence might affect the outcomes of my policy decisions for the economy of Econland by the fact that if consumers are confident, they will spend more, thereby boosting economic growth. In contrast, if the confidence level is low, consumption and spending among consumers decrease, thus negatively impacting economic growth. Consumer confidence is a relevant aspect for making informed macroeconomic decisions since it offers insights into how consumers could possibly behave in response to particular policy decisions. Therefore, understanding consumer confidence levels allows policymakers to make informed decisions on various policies to ensure effective stimulation of economic growth. References

Kramer, L. (2022, May 26). How the Great Inflation of the 1970s Happened . Investopedia. https://www.investopedia.com/articles/economics/09/1970s-great-inflation.asp Mankiw, N. G. (2021). Principles of economics (9th ed.). Cengage Learning. Trading Economics. (2019, May 13). United States Federal Corporate Tax Rate. Tradingeconomics.com; TRADING ECONOMICS. https://tradingeconomics.com/united- states/corporate-tax-rate

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