Sunday, November 25, 2012
The Fed Chairman Game
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24 comments:
The second time I played the game, I got "reappointed" as Fed Chairman after the unemployment rate settled at 4.6% and inflation at 1.9%.
Ultimately, my strategy was to keep the Fed rates the same if the trends were changing in the direction that I wanted. I noticed that it takes more than one quarter for a change in the Federal Funds Rate to completely change the inflation and unemployment rates. Still, the basic idea that an increase in Federal Funds Rate lowers inflation and raises unemployment was pivotal. However, I never drastically altered the Fed Rate; I noticed that minor alterations were more appropriate for stability. I am now indubitably certified to be the Federal Chairman.
After playing the game for the first time I was reappointed as chairman of the fed. The game ended with an unemployment rate of 5.13 % and an inflation rate of 1.71%.
As far as strategies went, the graph really helped me out by watching the effects of the raising and lowering of interest rates. My main focus was to reach all the target lines. When it came to altering the Fed Rate, I always made little changes at a time; never really altering the percentages that much. Therefore, I insured that I wouldn’t have any drastic changes in unemployment or interest rates. Ultimately, the game went well, and gave me a better understanding of the Fed Rates and its ties with inflation and unemployment.
After playing the first time and getting inflation to 8% and unemployment to near 10% I played again got it to inflation 1.07% and unemployment 5.07%. Ultimately my strategy was to try to keep unemployment at 5% while dropping inflation as low as I could (despite that it said to try to keep it at 2%). I was thrown off initially by the lag between changing the Fed rate and the effect on the economy but overall I think this was a good exercise to show the relationship that the Fed rate has with unemployment and inflation.
After playing this game for the third time, I got reappointed as Fed Chairman after the unemployment rate settled at 4.78% and inflation at 2.23%.
For strategies, my main goal was to keep the graphs close to the dashed target lines by manipulating the Federal Funds Rate. If things were going well, I would keep a steady rate, but if things started to shift, I would make little adjustments to the Federal Fund Rate to act accordingly. Also, paying attention to the worldly news was also pivotal so choices could me made to respond to economic events.
After playing the game for the first time, I was fired for high inflation with an unemployment rate of 3.59% and 6.62 % inflation rate. Because it takes time for the adjustments to take effect,I tried to keep the Fed rates the same so I don't alter the graph drastically. My strategy was to have the unemployment rate rise and inflation rate drop in order for the Fed rate to adjust. My unemployment rate ended with 4.95% and inflation rate at 1.04% despite the 2% mark. I was reappointed.
After playing this game for the for fifth time, I was finally reappointed as the Federal Chairman after the unemployment rate settled at 4.29% and inflation settled at 3.18%.
My strategy for this game was to try to keep both unemployment and inflation stable at around the dashed target line by changing the Federal Funds Rates. At first I just tried to keep the Federal Funds Rates at 4.5% until the unemployment and inflation rates started to change then I changed the Federal Funds Rates accordingly to make sure both unemployment and inflation are near the dotted line. It took my 5 attempts at this game to get reappointed because I didn’t find out that you have to make big changes in your Federal Funds Rates and time for the unemployment and inflation rates respond.
After playing the game for the third time, I finally became reappointed as the Fed Chairman with an unemployment rate of 4.89% and an inflation rate of 2.16%.
The strategy I used for the first couple of games was really drastic and everything I did either dropped or raised the unemployment and inflation rates with crazed lines. It was because I did not account for the lag in the game which I saw how much it influenced the lines. Once I realized this I understood where to set the Fed's rate at to equally raised both rates to where they needed to be. I couldn't account for the unexpected but I worked around it and as those occurred I adjusted accordingly.
After playing the game, I ended with 5.01% unemployment and 1.98% inflation.
My strategies for playing the game was to manipulate the federal funds rate so the unemployment would both be below the dashed lines. However, the two would cycle individually, making the balance quite difficulty. There is a new found respect for the people working at the federal reserve since there are so many more outlying influences that affect the market that they have to keep up with beyond controlling the federal funds rate.
The first time I played the game I was fired, the unemployment rate was 5.20%, the inflation rate was 6.47%. The second time I played unemployment was at 3.40% but inflation was slightly high at 4.07%. The last time I played I was reappointed as the Federal Chairman with unemployment at 4.44% and inflation at 2.91%.
At first thought was to keep the Federal Funds Rate at 4.50% but at the beginning of my term there was an oil crisis so unemployment rose but I adjusted the Federal Funds Rate too drastically so inflation sore. The second time I did a little better but not much. Instead of making radical changes I made small steady changes even when serious issues arose for example the value of the dollar rises significantly. In the last game I wasn't as cautious as I was in the last game which worked out better. So I basically learned to be careful but overly cautious because that could be as bad as being too hasty.
Well, I was dismissed after the first term! My inflation rate wouldn't go down and it ended up at almost 9%, even though I set the federal funds rate at 0%.
My initial strategy was just to follow whatever the situation told me. If the inflation rate went up, I set the federal funds rate well above that rate to lower inflation. On the other hand, if deflation was occurring, do the exact opposite. This game made me realize that, even though we had so little underling variables in our simulation, it was still a tough job! Now imagine their real life situation with millions and millions of Americans depending on their every move. Whew. Ultimately, I'm glad I'm not the federal chairman!
I was fired after my first term. My unemployment rate was up to 9%, and my inflation rate was close to 6% as well. My strategies were to change the federal funds rates according to the scenarios presented. Finding the balancing to the equation took a while to get used to, and it took me three tries to even come close to decent rates. The game simplified reality drastically, and it shows just how difficult being a federal chairman can be.
After a twotries and finally reading the instructions instead of just winging it on the third try i still had 4.91% unemployment and 5.56% inflation. instead of making huge changes to the federal funds rate i kept it at a steady pace. except when the inflation kept rising I added a lot to the funds rate and it then began to slowly help the inflation issue. If the inflation rate was moving towards the dashed line i would only make slight changes to the federal funds rate to keep from upsetting the balance. But, just when i thought it would soon go back to normal something like an oild crisis would come up and upset the rates and I would once more have to drastically change the federal funds rate. I did not get reappointed.
When I played, I was fired! For the game, I adjusted the funds rate according to the headlines, and I think that is why I lost. Every time they had a crisis, I would go the opposite way I went before... that strategy did not work at all. I drastically lowered the rate when something went wrong, then made them go really high when the next thing went wrong, I would be an awful chairman.
After my first term I was reappointed ad the Federal Chairman with the unemployment rate at 5.14% and inflation at 1.28%.
I first started by keeping the Federal Funds Rate at 4.00 then I watched the unemployment rate and inflation rate and adjusted the Federal funds Rate from 4.00 to 5.25%. I utilized the headlines to help me decide whether to change the Federal Funds Rate. It was difficult to keep unemployment rate and inflation at a satisfactory level, I could only have one doing well while the other one was above the normal rate. The trick for me was to slightly change the federal funds rate regularly.
After playing this game for the fourth time, I finally got reappointed as Fed Chairman with an inflation rate of 3.16% and unemployment rate of 4.68%.
My main strategy was to keep them both constant and not go through an extreme change. I tried to focus on all the headlines so I could change the Fed rate accordingly.
after playing the game about 2 times I got reappointed as the Chairman with an inflation rate of 2.56% and unemployment rate of 5.33%.
i didn't really have a specific strategy. i just followed the rules i guess. I reduced the federal funds rate when inflation was high and increased it when it was low. i wouldnt want to be a chairman in reality, it just seems like too much work...thats a definite no.
After retrying the game twice, I was finally reappointed as Fed chairman. Inflation was 2.21% and unemployment was inflation was 4.57%.
I found that I had to make some small changes constantly in order to reach the desired rate. Furthermore, it takes time to see the results, so it took me two tries to reach the target goal. Ultimately, I reduced the fund rate when inflation was running rampant, and the opposite when unemployment is high.
My strategy in the game was just to change the interest rate to what the market needed. I changed this rate very slow not to shock the market and i did pretty well. Through the strategy that I used I kept unemployment below the normal line and kept the inflation down to the target rate. I did quite well in the game and it gave me a better idea on how the Fed controls and manipulates the Fed rates to help bolster the economy.
After playing the game the for the second time, I managed to get reappointed with a 4.08% unemployment rate and a 1.97% inflation rate.
My strategies included keeping the Federal Funds Rate stable by not drastically changing it. Whenever a shift in the inflation rate or unemployment, I raised and lowered the Federal Funds Rate as I deemed fit, going as high as 7 and as low as 2. The worldly news also affected how I changed the Federal Funds rate.
On my third time playing I still got fired with Unemployment being 3.72% and the inflation rate being 2.10%. I would try to follow the Tight and Easy Money Policies depending on where the economy was heading. I think my problem was that I would increase the Federal Fund Rate too much or decrease it too little because I could not find a stable point to stop at.
At the third try of this game I was finally reappointed as fed chairman as I kept unemployment rate at 5.23% and inflation rate at 1.65%
My first two tries were an utter disaster, I tried making a few big changes but that ultimately led to disaster. However for my third trial what I did was watch the inflation rate more than anything and keep the changes small, and in the end I didn't touch anything.
After my first term I was dismissed. I set my federal funds rate to 5.0 for some time in the beginning and my economy was doing alright. But when it was hit by oil crisis, the interest rates just started rising dramatically. I tried lowering and highering my federal funds rate, but the inflation rate just getting going up. So at last i was dismissed.
The first two times I played, I went in the opposite direction of the headlines. If it seemed to go in the direction I wanted it to go, I went for a high jump at times which is probably why I got fired. The third time I played, I managed to keep the inflation rate 1.34% and the unemployment rate at 5.25%. I don't think I would make a great chair person unless I gain some experience dealing with the economy and utilizing the tight/easy money policies accordingly.
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