Check out this game created by the Federal Reserve. It deals with exactly what we are studying right now, monetary policy. The game puts you in the position of the Fed Chairman, and you must manipulate interest rates in order to balance unemployment and inflation. Click on the learn more button before playing. Investigate the Fed Toolkit and the other items in the help section. After this play the game. Give me a short summary of your strategy and how it went.
32 comments:
Period 4
I knew that by making the rate go up we were supposed to lower inflation but also make unemployment rise. I started out moving it up slowly and didn't see too much of a change. Then I moved it up about 1 or 2 numbers and the economy got better. The inflation was down around 2% and unemployment at 5%. So i moved it up even more then to see what would happen and it went down hill from there. The numbers for unemployment jumped and inflation decreased heavily, so I had to find a way to adjust it out again.
Increasing the rate creates a higher percentage of unemployment but lowers the inflation percentage. This game required a continuous effort to juggle both the unemployment and inflation rate relatively stable. Moving up 1 or 2 numbers helped the economy for a little while, and once those numbers increased bit by bit, the percentage comparisons became very different. Then I had to readjust the rate meter to "even" things out again. If the rate went too low, a greater percentage of inflation occurred.
Malavika Chander
Period 4
Phillip Thai
4th period
Knowing that you can lower inflation by setting the federal funds rate above the inflation rate, and that you can lower unemployment for a while and push up inflation by setting the federal funds rate close to the inflation rate. i thought it would be best to start the federal funds rate at 3.75 and adjust as the quarters decrease depending on how much both unemployment and inflation rate increased/decreased
Seventh Period
My first round i kept the federal funds rate at about 4.5%, plus of minus a point. There were no big changes and my unemployment rate at the end was 4.97% and the inflation rate was 1.03%. My second time around, I changed the federal funds rate by huge amounts, plus or minus six points. I was able to reign my numbers back in with an unemployment rate of 6.19% and an inflation rate of .45%. On my third time around, I kept the federal funds tax steady and ended at an unemployment rate of 5.08% and an inflation rate of 1.35%. Keeping my numbers steady was actually very hard and took responding to certain circumstances in a certain, timely manner. You have to be careful not to let a rate fall too far from average because then it is very hard to get it back without messing something else up.
This game was intriguing at first, but then it seemed dang near impossible to get the inflation rate to go down, no matter how I raised or lowered federal funds rate. So naturally, I got fired the first time around. The next round, I tried to play smarter, as opposed to willy-nilly, and got a more desired outcome.
This game made it so hard to keep the unemployment level and inflation rate where you wanted them to be. I kept moving the fund numbers in the right direction, but the real challenge is to know how much or how little. I would just jump from one end of the problem (inflation) to the other (unemployment). As the game went on I began to last longer because you learn to appropriately adjust based on how severe the issue is. You learn that keeping the economy stable is not as basic/easy as it sounds because you have to balance it in such a small interval with limited control over influencing factors.
The first time I played the game, I accidentally let inflation reach too high a number by the end of the session. However, my second play through it was overall successful by the end of it. When inflation went up, I increased the federal funds significantly. If employment went too high, I did not have to set the federal funds too low compared to the inflation, so that was okay. Overall, my plans were semi-successful, though the economy at the time of reappointment really influenced the choice for my position.
Will Ripley
Period 7
This game was difficult to control. When you made just one mistake, it was hard to get the game back on track. I tried to do what the newspapers told me to because they were supposedly experts. I ended up failing because once inflation started to go up, I couldn't get it to go back down.
7th period
My original strategy was to keep the federal funds between 3-5 percent, because that is what it said in the Dead Economist book. However, after seeing the unemployment rate go up, i started to increase the funds percentage which alleviated that but increased the inflation. After that point, no matter where my funds were at, inflation would not stop climbing. I even got to the point of 1.67% unemployment rate but my inflation kept roaring over 12%. I would make one bad chairman.
On my first game, I was able to keep the unemployment around 4-5% while the inflation started to go up. Due to my curiosity, I set the Funds Rate to max and see what would happen to the inflation and unemployment. Inflation went to -3.00% while the unemployment rises. And so I played for a second time and in order to keep it where you want it, you have to raise the fund rates and sometimes decrease it in order to keep that stability that is needed.
period 7
To start off I would stay at an unchanging pace until an event changed the direction of either inflation or unemployment and then I would make adjustments accordingly. I would change the number so that both the unemployment rate and inflation rate would stay as close to their lines as possible. I stuck to this tactic the multiple times I played the game.
I increased the rate to reduce inflation, however when inflation reduced, unemployment grew as well, and when i tried to reduce unemployment inflation started to go up again, and it was really hard balance them both, this game helped me to see how hard it is to take care of the nations economy.
I lowered federal funds rate to keep the inflation low. However, the unemployment rose and forced me to rise the federal funds rate. It is very hard to keep balance between inflation and unemployment.
I started by keeping the federal funds rate fairly level and the inflation and unemployment rates changed some, but not much. Then I began to mess with the federal funds rate to see what would happen. At one point inflation was at -3% and unemployment was nearly 20%, then inflation was 22% and unemployment got to 1.5%. These percentages were caused by me testing the high and low extremes of federal funds rate. I liked the graph showing you the trends of the rates that you're toying with. This game was interesting and was useful in seeing how the rates fluctuate in relation to one another.
Tia Wettman
Period 4
This game is hard to control. In my first try I was able to lower inflation rate, but my unemployment rate wasvery high. I tried to mess with the federal fund rates butif I made one mistake it washard to get things leveled off.
Kasey Saldana
Period 7
Getting the inflation to go down seemed easy at first, but then the unemployment rate would start to go really high, and getting that to go down took a lot of work. then deflation would start at an uncontrollable rate, and it would just start spiraling out of control from there. It seemed as if the perfect balance between the two was just always out of reach.
Karly Brightwell
4th period
The game was very interesting because maintianing a balance between inflation and unemployment was rather difficult. I did however get reelected. The graph was essential to watch because of the constantly changing economy, mainly if the newspaper said inflation I increased the rate and if it was complaining of unemployment I decreased the rate. It seemed to work.
Yeah, I didn't really like this game. I couldn't make the inflation rate ever go down and in the end I got fired. I also tried to follow what the newspapers told me to do but that didn't really help.
Period 7
This game was quite difficult because of the swinging rates of inflation and unemployment. I found it interesting because I suppose it account for lag times, since it took a few internals for any major effects to be seen. I tried to keep the Fed rate relatively constant, only changing it by a few percentage points each time. However, the effects seen from that strategy took a very long time to come to fruition.
Kenneth George
4th
Well, I started by moving the prices higher but only by smalle increments. However, when unemployment started to increase even higher, I had to move the federal funds rate to extremes in order to balance out the overbearing unemployment rate compared to inflation rate. Then I put decreased the federal funds rates because inflation began to increase drastically even though enemployment began to decrease. In the end, I moved the price back down slowly and as I did, inflation and unemployment began to both decrease. In the end, the final price for the federal fund rates ended with 6.00 and the unemployment rate being 5.89% and inflation being 2.89%, which was pretty reasonable. It taught me more about the money supply, how much of an effect the federal funds rate has on the economy.
Period 7
At first I decided to try to do the opposite of what the paper was saying in an effort to surprise the public and turn the market into a thing of chaos. For awhile, the market stayed relatively stable but after a while things started to move in an odd way.By the end, I was fired... but my unemployment rate was well under the target zone at 3.82% at the end!
Eamonn Gossard
Period 4
I started out trying to make small adjustments to try to keep inflation and unemployment at reasonable levels. However, an oil crisis made inflation rates rise through the roof. I tried for a while after the oil crisis to continue making only small changes, but I ended up getting frustrated with the lack of change in inflation, so I drastically raised the rate of money, which after a quarter also drastically increased the unemployment rate. Regardless, I was able to even back out both rates at the end.
4th period
As I played the game, I wanted to know what would happen if I raised the funds rate, and also when I lowered them. When I increased it by one notch the headlines of the newspaper wasn't so bad. Once I increased it a couple notches more, the newspaper's headlines scared me. One headline said that the dollar value is now a risk because the fund rates have gone to high. Then I guess the newspaper headlines started scaring me with all the negative news, so then I started to lower the funds, news started to get better. As I kept playing I decided to stay at 3.75 because when the funds was at that notch, the headlines did not seem so bad. Then 3.50 the economic report was okay. I like positive headlines, so I kept it that way, but when I put it on 3.50 again there was inflationary pressure. Every time the quarter was finished the headlines changed and the inflation rate just kept going up although I was not changing it. It was odd. This game was hard, but interesting.
I figured that it would be best to keep the rate about even to the inflation for the first few quarters, but once inflation started rising after the third quarter I started to try changing the rate up by three numbers, in big spikes to allow for the lag between the policy changes to take effect. This was successful in making quick changes in the economy several times. Midway into the game my unemployment rate and Interest rate merged into a single line for one month, in the stable zone, but started splitting in rapid climb and sink again with the end of the spending spree. I ended with inflation right below the stable percentage and Unemployment slightly above.
Aimee Breaux
My strategy was to quickly put things back in order by drastically changing the interest rate to correspond with the desired effect (i.e. raise fed supply of money to increase inflation), but that threw things off. So, I tried to take it slower and adjust the rates in a more subtle manner so as to not cause rapid fluxuation, but the stupid oil crisis hit! What the heck! The stupid economy stopped shifting normally. I dropped the money supply down to zero and inflation still rose! Then people had no jobs! It was horrible. I'm never working for the government.
Aimee Breaux
My strategy was to quickly put things back in order by drastically changing the interest rate to correspond with the desired effect (i.e. raise fed supply of money to increase inflation), but that threw things off. So, I tried to take it slower and adjust the rates in a more subtle manner so as to not cause rapid fluxuation, but the stupid oil crisis hit! What the heck! The stupid economy stopped shifting normally. I dropped the money supply down to zero and inflation still rose! Then people had no jobs! It was horrible. I'm never working for the government.
Chris Joseph
Period 4
I found it hard to keep inflation at 2% and unemployment at 5%. I tried to keep inflation low by rising the interest rates but then sometimes it would cause deflation. I didn't really have that much trouble with unemployment rates, it was mostly just inflation. I learned that there is a very narrow window of desired outcome when trying to control the economy.
The game was really fun. The first time I played it I didn't do that bad but I had massive inflation and I didn't know how high was too high when it came to interest rates. I didn't get reappointed my first time playing the game. By the second time I had the game down to a science. I knew what to do when my dollar value went down and i knew how to stop inflation before it happened. Though it was easy on the game i know in the real world it is much harder. I personally would not want to be in a position where I could get all the blame if the economy is bad and none of the glory or a simple "thanks" when the economy is good. lol Its like being the point guard for the whole world.
Thampuratty Jayadevan
Period 7th
This game is definetly not for me. The paper headlines kind of scared me majority of the time. I was kind of able to keep the unemployement rate and inflation rate slightly above the norm and it seems to have worked. But i went up to 7% and after i came back down to a 4% the inflation rate was still high. I kind of got mad by that time. My inflation rate kept going up no matter what i did .I have no idea as to how to fix it get it back to equilibrium.
Jessica Sheely
7th Period
After playing this game, I have some sympathy for the people at the Federal Reserve. It is extremely difficult to keep that perfect balance, and I found that I had a tendency to overcompensate, which would create more problems. My inflation rate got down to -2.8, at which point I basically destroyed the economy. My strategy didn't work because by the end of the game, I was fired.
Even though increasing the rate makes unemployment go up, it also makes inflation go down. The best thing to do would be move up 1 or 2 numbers, and to start the federal funds rate at about 3.75. THen, you would just adjust as the quarters decrease. This would depend on the effect of unemployment and the inflation rate. As long as you're careful to not let the rate get far from the average, the numbers and circumstances will stay stable.
Jay Baath, 4th period
I didn't really have that much trouble with unemployment rates, it was mostly just inflation. I learned that there is a very narrow window of desired outcome when trying to control the economy. Knowing that you can lower inflation by setting the federal funds rate above the inflation rate, and that you can lower unemployment for a while and push up inflation by setting the federal funds rate close to the inflation rate.
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