Teachers' Guide - Using the Virtual Economy for A-level Economics

The Virtual Economy is likely to be of most value in the teaching of macroeconomics, but there are also many areas of microeconomics where it is relevant. The model can also be used very effectively as a prompt for discussion. Different groups could be set different (and perhaps differentiated) experiments to carry out, and asked to report back on the results. They could be encouraged to try to explain the reasons for the changes they found, supporting their presentation with relevant economic theory.

The table below considers the areas of the Virtual Economy that are relevant for different topics on the syllabus. The topics considered are:

• Market theory
• Firms
• Wages
• Market failure
• National income determination
• Money
• Unemployment and inflation
• Government and fiscal policy

Topic	Virtual Economy resources		Location
	Type	Content	Floor	Room / link
Market theory	Theories	The effect of indirect taxes on prices	2nd - Economic policy	Policy tools - VAT (T1)
	Theories	The incidence of tax - the effect of elasticity	2nd - Economic policy	Policy tools - VAT (T3)
	Theories	Neo-classical free-market theory	3rd - Library	Theory - Classical
	Worksheets	The impact of indirect taxes on prices and income distribution	2nd - Economic Policy	Policy tools - VAT (W1)
Firms	Case studies	The effect of different economic policies on a variety of businesses	1st - Case studies	Business
	Worksheet	The effect of tax changes on businesses	2nd - Economic policy	Policy tools - income tax (W4)
Wages	Model	Experiment to see the effect that different tax and benefit policies have on wage levels	4th - Model
Market failure	Theories	Using taxes to correct market failure	2nd - Economic Policy	Policy tools - VAT (T4)
	Theories	Public and merit goods	2nd - Economic Policy	Policy tools -government expenditure (T2)
	Worksheet	Using taxes to correct market failure	2nd - Economic Policy	Policy tools - VAT (W3)
National Income determination	Theories	Keynesian view of income determination	3rd - Library	Theory - Keynesian
	Theories	Classical view of income determination	3rd - Library	Theory - Classical
	Theories	Monetarist view of income determination	3rd - Library	Theory - Monetarist
	Theories	Causes of trade cycle	2nd - Economic Policy	Outcomes - economic growth (T1)
	Theories	Costs of economic growth	2nd - Economic Policy	Outcomes - economic growth (T2)
	Theories	Sources of economic growth	2nd - Economic Policy	Outcomes - economic growth (T3)
	Theories	Policies to boost economic growth	2nd - Economic Policy	Outcomes - economic growth (T4)
	Theories	Say's Law	3rd - Library	Theory - Classical
	Theories	The Multiplier	3rd - Library	Theory - Keynesian
	Worksheets	Causes and consequences of economic growth and policies	2nd - Economic Policy	Outcomes - economic growth (W1)
Money	Theories	Quantity theory of money	3rd - Library	Theory - Monetarist
	Theories	The market for loanable funds	3rd - Library	Theory - Keynesian
	Theories	The determination of interest rates	2nd - Economic Policy	Policy tools - interest rates (T1)
	Theories	Monetary policy - the use of interest rates	2nd - Economic Policy	Policy tools - interest rates (T2)
	Theories	The impact of interest rates on demand	2nd - Economic Policy	Policy tools - interest rates (T3)
	Theories	Maintaining interest rates	2nd - Economic Policy	Policy tools - interest rates (T4)
	Worksheets	Factors determining interest rates and their effect on the economy	2nd - Economic Policy	Policy tools - interest rates (W1)
Unemployment & inflation	Theories	Keynesian inflation theory	3rd - Library	Theory - Keynesian
	Theories	Expectations augmented Phillips Curve	3rd - Library	Theory - Monetarist
	Theories	Costs of unemployment	2nd - Economic Policy	Outcomes - unemployment (T1)
	Theories	Types of unemployment	2nd - Economic Policy	Outcomes - unemployment (T2)
	Theories	Causes of unemployment	2nd - Economic Policy	Outcomes - unemployment (T3)
	Theories	The Phillips Curve	2nd - Economic Policy	Outcomes - unemployment or inflation (T4)
	Theories	Costs of inflation	2nd - Economic Policy	Outcomes - inflation (T1)
	Theories	Demand-pull inflation	2nd - Economic Policy	Outcomes - inflation (T2)
	Theories	Cost-push inflation	2nd - Economic Policy	Outcomes - inflation (T3)
	Worksheets	Causes of unemployment and policies	2nd - Economic Policy	Outcomes - unemployment (W1)
	Worksheets	The Phillips Curve	2nd - Economic Policy	Outcomes - unemployment or inflation (W2)
	Worksheets	Causes of inflation and policies	2nd - Economic Policy	Outcomes - inflation (W1)
Government & fiscal policy	Theories	Keynesian view of fiscal policy	3rd - Library	Theory - Keynesian
	Theories	Classical view of fiscal policy	3rd - Library	Theory - Classical
	Theories	Monetarist view of fiscal policy	3rd - Library	Theory - Monetarist
	Theories	The canons of taxation	2nd - Economic Policy	Policy tools - income tax (T1)
	Theories	Progressive and regressive taxes	2nd - Economic Policy	Policy tools - income tax (T2)
	Theories	Marginal and average tax rates	2nd - Economic Policy	Policy tools - income tax (T3)
	Theories	Demand-side and supply-side effects of tax changes	2nd - Economic Policy	Policy tools - income tax (T4)
	Theories	The Laffer Curve	2nd - Economic Policy	Policy tools - income tax (T5)
	Worksheets	Tax as a demand-side policy	2nd - Economic Policy	Policy tools - income tax (W1)
	Worksheets	Tax as a supply-side policy	2nd - Economic Policy	Policy tools - income tax (W2)
	Worksheets	The nature of tax - progressive / regressive etc.	2nd - Economic Policy	Policy tools - income tax (W3)
	Theories	Transfer payments	2nd - Economic Policy	Policy tools -government expenditure (T1)
	Theories	Current and capital government expenditure	2nd - Economic Policy	Policy tools -government expenditure (T3)
	Theories	Automatic and discretionary spending	2nd - Economic Policy	Policy tools -government expenditure (T4)
	Worksheets	The effect of government expenditure on the economy	2nd - Economic Policy	Policy tools - government expenditure (W1)
	Worksheets	The impact of different types of government expenditure	2nd - Economic Policy	Policy tools - government expenditure (W2)
	Theories	PSNCR and the trade cycle	2nd - Economic Policy	Outcomes - PSNCR (T1)
	Theories	Cyclical and structural PSNCR's	2nd - Economic Policy	Outcomes - PSNCR (T2)
	Theories	PSNCR and the money supply	2nd - Economic Policy	Outcomes - PSNCR (T3)
	Theories	The PSNCR and National Debt	2nd - Economic Policy	Outcomes - PSNCR (T4)
	Worksheets	The value of the PSNCR and policies	2nd - Economic Policy	Outcomes - PSNCR (W1)
	Theories	Causes of debt	2nd - Economic Policy	Outcomes -Debt ratio (T2)
	Theories	Debt and Europe - do we meet the Maastricht criteria?	2nd - Economic Policy	Outcomes - Debt ratio (T3)
	Worksheets	What determines the value of debt ratio	2nd - Economic Policy	Outcomes - Debt ratio (W1)