ECO1103 Macroeconomics

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The Government Game

(adapted for HCT, with permission, from tutor2u, UK1)

INSTRUCTIONS

  1. Students are required to work on their project independently and to submit their individual
  2. Students must submit their work online (through BBL) on or before the set
  3. HCT’s academic dishonestly and plagiarism policy applies to this
  4. There will be one class session during which the tutor will explain the project requirements to the students, will show the students how the software works and allow the students time to experiment with the software in class.

AIM OF THE GAME

This game aims to familiarize players with various types of policies applicable in an economy. Through gameplay, participants will gain insight into how each policy can trigger ripple effects on different economic variables.

DESCRIPTION

You are the advisor to the finance minister of your country. The country currently is facing a period of very slow economic growth.

Your Prime Minister has given you total power to run the economy over the next 4 months and hopes that you will be able turn the economy around to a successful one.

To manage the economy, you are allowed to implement different fiscal and monetary policies.

  1. “The Government Game - Economic Simulation Activity,” tutor2u, accessed 4 March, 2024, https://tutor2u.net/economics/reference/the-government-game-economic-simulation-activity.

TASK

You have a list of 19 potential policies. You must choose:

  • only 1 policy in the first month
  • THREE policies for each of rounds (months) 2, 3 and 4.
  • You should implement each policy separately and note its effect on the
  • You can only use each policy once.

Each time that you choose a policy you must:

  • enter your choice in the spreadsheet on the computer and
  • note the results that you achieve on (i) rate of inflation, (ii) unemployment, and

(iii) economic growth. This will give you a ‘Government Score’ which relates to the public approval of your policies and the amount of debt that the economy has.

THE RULES

  1. If at the end of the 4 rounds your poll rating is less than ‘zero’ you have not managed to gather any public approval and the Government Score will show as
  2. If your debt grows larger than 10% of your GDP, your Government Score will drop to ‘zero’. You can continue making policy choices, but your score will only return to its natural rate once your debt goes below 10%.
  3. The Government Score is calculated by using the combined totals of your scores for GDP, inflation, and
  4. GDP is added to your This is good news, as long as your GDP score is positive! Try to keep your GDP as high a score as possible.
  1. Inflation: your economy operates well if your inflation rate is between zero and 2 In this case your inflation score is added to your Government Score. If your inflation score dips below zero it will be recorded as zero on your score. If your inflation score goes above 2 points, then it is deducted from your government score. Try to keep your inflation rate between zero and 2 points.
  2. Unemployment: your economy hopes for zero unemployment but can operate well if unemployment scores 1 point. So, if your unemployment score is zero or 1 it will not be added to your Government If unemployment falls below zero (under- employment) then nothing will be added to your Government Score. If your unemployment score exceeds 1 point then it will be deducted from your government score. Try to keep your unemployment rate between zero and 1 points.
  3. Debt: Your country is willing to accept a certain amount level budget deficit (debt). As long as your debt does not exceed 9 points then your Government Score will not be affected. If your Debt score exceeds 9, then your Government Score will be set at zero until you can get your debt to below 10.Try to keep your Debt score below 10.
  1. Public Opinion (Poll): This measures the popularity of the government policy amongst THERE IS NO NEED TO CONSIDER THIS VARIABLE.
  2. Policy Choices: you are to choose from the following policies listed below. Remember that you can use each policy only ONCE.
No Policy description
1 Increase government spending on health care
3 Increase income tax by 2% to allow a fairer distribution of income in the country
4 Increase the interest rate by 1 %
5 Give large subsidies to encourage firms to expand to areas of high unemployment
6 Increase spending on roads and bridges
7 Improve funding to schools and universities
8 Increase the minimum wage by 10 AED per hour
9 Increase VAT by 2.0%
10 Devalue the currency, so that the country becomes more competitive
12 Increase grants to encourage small businesses to grow and become more profitable
14 Subsidise exporting businesses
15 Subsidise local agriculture
16 Join a free trade area with the rest of the GCC area. This greatly increases exports from our country
18 Buy bonds to increase the money supply
19 Introduce corporation tax at 5 % of profits
21 Reduce unemployment benefits and pensions paid by government
22 Increase spending on house building projects by the government
25 Government offers grants to businesses to upgrade their machinery and technology to become more efficient
28 Reduce the costs and processes needed to set up and register a new business

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