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Developments in Economics & Business Education 1-2 September 2005

Discover how the Virtual Chancellor Simulation can be used in economics and business education to teach macroeconomic theory and analyze the impact of policy measures on households and macroeconomic aggregates.

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Developments in Economics & Business Education 1-2 September 2005

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  1. Developments in Economics & Business Education1-2 September 2005 Using the Virtual Chancellor Simulation John Houston & Anne Gasteen Economics’ Research Group, Caledonian Business School, Glasgow Caledonian University j.houston@gcal.ac.uk a.gasteen@gcal.ac.uk

  2. Using the Virtual Chancellor Simulation Context : Level Three Macro theory module (IS-LM-FE; DAD-SAS) But can be used at almost any level (incl. School) Web-based: http://www.virtual-worlds.biz/vwc/ (now reasonably reliable) Parameterized for the UK Economy ‘Black Box’ but free to use

  3. Menu Commands

  4. Quick Run [1] 1. Can change any combination of these four variables 2. Submit to the ‘Black Box’ …. or get back to the starting values

  5. Quick Run [2] • Increase basic rate of tax from 22% to 25% Net weekly effect on sample households Effect on key Macro aggregates

  6. Full(er) Run [1] • Can change: • Income Tax, National Insurance & Spending Taxes • Government Spending on : Defence, Education, Law & Order and Health • Base Rate

  7. Full(er) Run [2] Appears only to affect macro aggregates, but not households

  8. Full(er) Run [3] Tabular & Graphical Output

  9. Full(er) Run [4] Analysis of effects on the sample households

  10. Demo : 2005 Budget Measures Personal Allowance = £4,895 Income Tax Basic Rate = 22% Starting rate = 10%, Higher rate = 40%) National Insurance = 11% Between lower and upper earnings limits (£94 - £630 pw) above upper earnings limit: 1% VAT Standard Rate = 17.5% Reduced Rate 5% (8% in model)

  11. Demo : 2005 Budget Measures • Govt spending: • Public Order & Safety = £31bn => 82.35% increase • Defence = £28bn => 6.67% reduction • Health = £90bn => 20% increase • Education = £68bn => 13.33% increase • Basic Rate of Interest = 4.5% (reduction of 0.25%)

  12. Our use of VC at GCU • Three, one-hour supervised computer labs • Introduce - ‘Quick Run’ • Altering Direct & Indirect Tax Rates/Allowances • Altering Government Spending & Interest Rates • Students attempt exercises throughout, considering the impact upon: • Households (several representative types) • Macroeconomic Aggregates • Assessable Coursework • Replicate, as far as possible, the most recent Budget & Autumn Statement • Individually, or in teams, depending upon scope & abilities

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