Fiscal Policy Lab

Fiscal Policy Simulator — Government Budget & GDP

Fiscal policy uses government spending and taxation to stabilize the economy during recessions or cool it during booms. This simulator implements an IS-LM or simple Keynesian aggregate demand framework where you control the government budget directly, distinct from monetary policy (which operates through interest rates) or the multiplier effect (which isolates the spending-output chain). Changing the deficit shows crowding-out and debt dynamics.

What you can do in this simulation

• Raise or cut government spending and see GDP adjust through the expenditure multiplier
• Change tax rates and observe disposable income, consumption, and aggregate demand shifts
• Track the resulting budget surplus or deficit and cumulative debt path
• Apply a fiscal stimulus during a recession and compare GDP recovery paths
• Observe crowding-out as higher deficits push up interest rates in the IS-LM model

Concepts covered

aggregate demand · budget deficit · crowding-out · IS-LM model · government spending · tax multiplier

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Free to use in your browser — no signup required. Found a bug or have an idea to make it better? Tell us.