Description 
You should not attempt this simulation until you have completed the Policy Tool in this module.

This simulation is the culmination of all your knowledge of macroeconomics. Here you are able to implement policy, both fiscal and monetary, in response to real-world situations. What is your objective for the simulation? That depends. Some economists and policy makers tend to be concerned with unemployment; others with inflation. Macroeconomics requires tradeoffs. You will come to see that it can be difficult to keep both prices and unemployment low at the same time. You will also find that, under some paradigms, some problems simply defy correction.

In this simulation there are four different scenarios you may choose. Each of these scenarios represents a shock to the macroeconomic equilibrium. However, the nature of the shock depends to some extent on the paradigm with which you view it. In other words, you must choose both a shock (scenario) and your perspective on the shock (paradigm).

Once you choose a scenario and a paradigm, the graph window will display the equilibrium condition prior to the onset of the scenario you have selected. Once you have examined the starting condition, pree the "Continue" button. The Pleasantville Post will then describe the shock to the system, and the graph window and table will reflect the new conditions. Again, once you have considered this, press "Continue". Now is your chance to implement policy; implement some fiscal or monetary policy, just like you did in the Policy Tool, and then press "Continue". Or, choose "No Change" as your policy. Doing nothing is a policy, after all.

Now you can see how the economy reacted to your changes, and how different policies have different effects depending on the paradigm you have chosen. Watch the Pleasantville Post for headlines; market reactions to policies will be revealed there. Try to work each scenario from within each paradigm and see how your results differ.
 
 
 
 
 

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