1 developments in economics & business education 1-2 september 2005 using the virtual chancellor...
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Developments in Economics & Business Education
1-2 September 2005
Using the Virtual Chancellor SimulationJohn Houston & Anne Gasteen
Economics’ Research Group, Caledonian Business School, Glasgow Caledonian University
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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
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Menu Commands
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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
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Quick Run [2]•Increase basic rate of tax from 22% to 25%
Net weekly effect on sample households
Effect on key Macro aggregates
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Full(er) Run [1]
• Can change:
Income Tax, National Insurance & Spending Taxes
Government Spending on : Defence, Education, Law & Order and Health
Base Rate
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Full(er) Run [2]
Appears only to affect macro aggregates, but not households
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Full(er) Run [3]
Tabular & Graphical Output
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Full(er) Run [4]
Analysis of effects on the sample households
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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)
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Demo : 2005 Budget Measures
• Govt spending: Public Order & Safety = £31bn => 82.35%
increaseDefence = £28bn => 6.67% reductionHealth = £90bn => 20% increaseEducation = £68bn => 13.33% increase
• Basic Rate of Interest = 4.5% (reduction of 0.25%)
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Our use of VC at GCU• Three, one-hour supervised computer labs
Introduce - ‘Quick Run’Altering Direct & Indirect Tax Rates/AllowancesAltering Government Spending & Interest Rates
• Students attempt exercises throughout, considering the impact upon:
Households (several representative types)Macroeconomic Aggregates
• Assessable CourseworkReplicate, as far as possible, the most recent Budget &
Autumn Statement Individually, or in teams, depending upon scope & abilities