I think what matters more is the combination of shortcuts, how we define time, and the scope of a simulation.
E.g. if I want to simulate humanity, while I need to create the appearance of a universe, the scope of observation of the universe is very, very limited, so I don't need to actually simulate anything other than Earth and maybe a few minor bits and pieces of the solar system. Outside of that, I can take a leaf from the book of Elite, and simply have a way to generate whichever bits and pieces that those annoying astronomers happens to try to observe, to sufficient fidelity to feed into the simulation.
On Earth too, I could simplify drastically. E.g. there was a school of philosophy called Empirio-Criticism that believed only that which is directly observed by the senses exist (they are perhaps best known today through an obscure book by Lenin called Materialism and Empirio-Criticism [1] largely motivated by the fact that one of Lenins opponents in the Bolchevik party was leading supporter of the empirio-criticists). Ernst Mach - a physicist - caused some consternation, for example, by expressing doubt that atoms existed... As such it occupies a middle ground between Berkeleys Idealism and Materialism.
But imagine if they were right in the context of a simulation: The simulation, like games like Elite or Minecraft, only instantiates what you can observe directly, and when you can no longer observe it, it is either discarded, or stored (e.g. Elite re-generates each solar system on entry; Minecraft after a while de-spawns any entities that are not contained, so e.g. you can maintain an animal farm, but only as long as the animals are in a small enough enclosure). Since you could introspect the mind of the simulation subject, you could determine (or change!) which details the subject remembers, and allow everything else to be re-generated as needed.
Furthermore, depending on the simulation goals, it'd not necessarily need every person in the simulation to be "real" - it could imbue persons you run into with a personality and generated mind just for the time you interact with them, and step their complexity up/down as needed.
It doesn't need to be correct, just to be believable by someone who has no memory that contradicts it.
Lastly, unless there are reasons we don't know that requires a simulation of a mind to run at a specific speed, a lot can be solved simply by slowing a simulation down.
In other words: If you first go down the rabbit hole of a simulated reality, things get hairy quite quickly.
[1] https://en.wikipedia.org/wiki/Materialism_and_Empirio-critic...