Economics simulation

In economics and especially macroeconomics, the effects of proposed policy actions, such as fiscal policy changes or monetary policy changes, are simulated in order to judge their desirability. A mathematical model of the economy, having been fitted to historical economic data, is used as a proxy for the actual economy; proposed values of government spending, taxation, open market operations, etc. are used as inputs to the simulation of the model, and various variables of interest such as the inflation rate, the unemployment rate, the balance of trade deficit, the government budget deficit, etc. are the outputs of the simulation. The simulated values of these variables of interest are compared for different proposed policy inputs to determine which set of outcomes is most desirable.