2003/2004

Advanced Placement

MacroECONOMICS

The MacroSIM Program

What is MacroSIM?

MACROSIM is a computerized macroeconomic simulation of the U.S. economy developed by Craig A. Roger and Ross P. Daniel
for the National Council for Economic Education.

How does it work?

To start, production, employment, and price data on the initial status of the computerized U.S. economy are displayed for your review.  Each quarter you can make changes to fiscal and monetary policy.  You will be playing the role of the president, Congress, and the Fed as you make changes to the nation's money supply, federal expenditures, and the marginal tax rate.
 

Hopefully, you will be able to make changes that will improve the condition of the economy.  After you enter your decisions, a quarter (3 months) passes and new data are displayed that indicate the status of the economy.  You can review previous quarters' data and have the program plot graphs for your analysis.  In using this simulation, you may experience some of the same problems that the president, Congress, and the Federal Reserve Board of Governors experience in real life.
 

Directions for use:

1.  The 19 files needed to use MacroSIM are distributed to you in a self-extracting zip file named "install.exe" To install and start the program:

  1. Download the MacroSIM software by clicking on the download link above and save the file (install.exe) to your desktop.

  2. Double-click the file install.exe. A WinZip Self-Extractor dialogue window will open.

  3. Double click the install.exe file. In the dialogue box enter the path C:\MacroSIM (if not already entered) and click the Unzip button. This will unzip the file, create a folder called "MacroSIM," and copy 19 files to the folder. Click the "Close" button to exit.

  4. If the folder MacroSIM does not appear, use the "Refresh" option on the Windows Explorer's View menu.

2.  When you open the MacroSIM.exe document, MacroSIM will ask you to enter your name.If you do not enter this information correctly your work will not be saved.

Note:  If you want to use MacroSIM without saving the results do not enter a course number, etc.  You can also avoid saving your work by responding "no" to the "save results?" prompt when you exit the program. 

3.  The simulation begins when the screen illustrated in Figure A appears (see below).  The top window of this screen provides information on the original condition of your economy in the initial quarter, quarter 0.

4.  Using the knowledge you have acquired in this class, review the status of the economy. Once you have assessed the situation, enter any changes you  think appropriate in the monetary and/or fiscal policy variables in the  lower window.

  For example, the changes entered in Figure A are to increase the money supply by $5 billion, reduce government expenditures by $4 billion, and raise the marginal tax rate by 1%. 



                                        Figure A
     =============================================================================
     |-[GNP Accounts, Quarter   0]-----------------------------------------------|
     |Potential NNP.............(Q) 4200.0   Unemployment Rate (%)....(U)   4.00 |
     |Net National Product......(Y) 4100.0   Rate of Inflation (%)...(P2)   4.00 |
     |Consumption Expenditures..(C) 2934.0   Price Index..............(P) 100.00 |
     |Net Investment...........(In)  260.0   Rate of Change-NNP (%)..(Y2)   5.00 |
     |Government Expenditures...(G)  940.0   Inventory Disinvestment..(A)   0.00 |
     |Total Taxes...............(T)  825.0   Interest Rate (%)........(R)   6.00 |
     |Retained Earnings.........(E)   82.0   Money Supply.............(M)  800.0 |
     |Disposable Income........(Yd) 3193.0   Marginal Tax Rate (%)...(T1)  25.00 |
     |Personal Saving...........(S) 259.00   Overall Success Index....(W)   4100 |
     -----------------------------------------------------------------------------
     [F1] Help  [F2] Review Quarters  [F3] Graphs  [F4] Phillips Curve  [Esc] Quit
     
      Instructions:  This is a computer simulation of the United States economy.
                     Your fiscal and monetary objectives are:
                        1) to minimize the UNEMPLOYMENT and INFLATION rates
                        2) to maximize the rate of growth in NET NATIONAL PRODUCT.
                     You can change the money supply, government expenditures, and the marginal tax rate to attempt to achieve these goals.
                                                                                 
     |-[Policy Variables]---------------------------------------------------------
     | Enter your changes in:            Money Supply: 5.0                       |
     |                        Government Expenditures: -4.0                      |
     |                              Marginal Tax Rate: 1.0                       |
     |-Is this correct? (Y/N)-----------------------------------------------------
     =============================================================================

       Once you enter your changes, verify that the values you entered are correct. MacroSIM will recalculate the economic conditions for the subsequent quarter incorporating your changes.  The new data reported for quarter one are  illustrated in Figure B below. 

                                       Figure B
     =============================================================================
     |-[GNP Accounts, Quarter   1]------------------------------------------------
     |Potential NNP.............(Q) 4239.5   Unemployment Rate (%)....(U)   4.50 |
     |Net National Product......(Y) 3982.2   Rate of Inflation (%)...(P2)   4.00 |
     |Consumption Expenditures..(C) 2820.5   Price Index..............(P) 100.00 |
     |Net Investment...........(In)  225.7   Rate of Change-NNP (%)..(Y2) -11.49 |
     |Government Expenditures...(G)  936.0   Inventory Disinvestment..(A)   0.00 |
     |Total Taxes...............(T)  835.4   Interest Rate (%)........(R)   5.90 |
     |Retained Earnings.........(E)   79.6   Money Supply.............(M)  805.0 |
     |Disposable Income........(Yd) 3067.2   Marginal Tax Rate (%)...(T1)  26.00 |
     |Personal Saving...........(S) 246.72   Overall Success Index....(W)   4023 |
     -----------------------------------------------------------------------------
     [F1] Help  [F2] Review Quarters  [F3] Graphs  [F4] Phillips Curve  [Esc] Quit

                          Key         Function
                          --------------------------------------------
                          [F1]  Display Help Information
                          [F3]  Review Data for Prior Quarters
                          [F4]  Plot Time-Series Graphs
                          [F5]  Plot Phillips Curve (last 20 quarters)

     |-[Policy Variables]---------------------------------------------------------
     |Enter your changes in:            Money Supply:                            |
     |                       Government Expenditures:                            |
     |                             Marginal Tax Rate:                            |
     |----------------------------------------------------------------------------
     =============================================================================

       Note the options on the Help Line (center of the screen) available to you for reviewing the data for prior quarters, graphing data on a time-series basis, and plotting a Phillips Curve for your economy.  For best results, have several quarters completed before attempting to use the graph. Continue to make decisions until you have completed your practice session 
       or your extra credit assignment (see requirements below). 

       To terminate the program, press Esc.  You will be asked if you want to save your changes.  If you are doing MacroSIM for extra credit be sure you have recorded the values required, and you are satisfied with the results before saving.  See the extra credit assignment below.
       
Assignment:
    ----------
    Starting with quarter zero, make changes in the model's policy variables that cause the macroeconomic performance of the economy to improve as measured by  the "Overall Success Index." This index can be found in the lower right side of the data window (see Figure A or B above).

Requirements to Pass:
    --------------------
    In order to receive the credit, you must comply with the following requirements relative to the use of the MacroSIM program: 

    1.  Complete Exactly Sixteen (16) Quarters
      
        You must generate changes in the policy variables for exactly sixteen (16) quarters (no more, no less).  In other words, you are "in charge of the economy" for four years, and your extra credit will be awarded according to how well you manage the economy during those four years.  

        Note:  Record the changes that you make to the policy variables for each quarter on the MacroSIM Report Form. 

    2.  Increase the Overall Success Index to 4800 or Higher
      
        For the last quarter (number 16) the "Overall Success Index" for your economy must be at least 4800.  The original value of the Success Index at quarter zero is 4100.  Therefore, you must "grow" the index by 700 or more points. 

    3.  Save Your Data
      
        When you see "GNP Accounts,  Quarter 16" in the top left corner of the  screen, you have completed the assignment.  Do not continue.   Enter the final values for the variables listed on the MacroSIM Report Form.   

        Press "Esc" and choose to quit the program, and indicate you wish to save your data.  Note:  In order to receive credit for your effort, you must "save" your data as you quit the program.

    4.  Complete and Turn in the Assignment on Time
         
        Turn in to the instructor the completed MacroSIM Report Form.