Developments in Economics

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_at_gcal.ac.uk a.gasteen_at_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 gt 82.35 increase
• Defence 28bn gt 6.67 reduction
• Health 90bn gt 20 increase
• Education 68bn gt 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