Sunday, April 07, 2013
The Fed Chairman Game
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.
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46 comments:
the struggle...
I played the waiting game and got unemployment down to 1.5% but my inflation was at 17%. I was getting an inverse relationship between inflation and unemployment and inflation. I overcome inflation by trying to deflate the interest rates which failed miserably.
Alexis Buck.
As I started the game, I kept the federal funds rate at 4.5, and the inflation started to rise, so I bumped it up to 5%. I kept it that way, and the economy seemed to be pretty stable until inflation started to begin rising again. Once I put the federal funds rate to about 4.75%, the inflation was steadily around 2.04%, and unemployment 5.32%. However, that only brought down the inflation to 1.40%, and unemployment to 5.80%, so I changed it to 3.75%. Changing the federal funds rate to 3.75% led to both the unemployment rate AND the inflation to change to do the opposite from what I wanted, which was increase the unemployment to 6.19%, and inflation to .67%. I changed it again, and the unemployment decreased, but so did inflation. I changed it to 6.5%, and unemployment steadily started to go towards the normal rate, as inflation began to increase as well. After trying to mess with the federal funds rate, I ended up getting the unemployment rate to 5.44%, but the inflation somehow ended up at -.18%. Fail fail fail.
What my strategy intended to be was to kind of switch back and forth between raising the inflation and lower the unemployment rate to keep it pretty stable, but that did not work so well.
I tried very hard to bring my economy to normal however my strategies to lower were really lacking as I continued to play throughout the game. At first I lowered the federal funds rate which caused inflation to increase slightly and federal funds rate to decresase from this I continued to increase/decrease the federal funds rate which at the end was no good as it caused more harm than it did any good. In short words, I failed tremendously.
So I tried to use the techniques stated over to the side of the screen about how to control inflation and unemployment. The first time that I used these techniques it completely destroyed the economy and inflation kept on rising no matter how high I kept on raising the federal funds rate. So I decided to play a second time with a little different strategy. I wouldn't change anything until the unemployment and inflation rates were at the same level. Then I made small adjustments to the federal funds rate. Then it went completely wacko and so I raised the federal funds rate to about 10% and the inflation rate slowly started arcing back down(but it took forever). So I thought that I could lower the federal funds rate slowly. In the end, the federal funds rate was about 8.5%, the unemployment rate was about 3%, and the inflation rate was about 6%. I thought I did pretty good, but the game said that I was fired.
Overall, the game was really fun and had a lot of information about the government's plans involving the economy and their effects.
The game was really interesting. When I started the game the first time, I raised the federal funds rate hoping to decrease inflation and slightly increase the unemployment rate but as I continued to do this, the interest rate continued to drop and eventually hit deflation. Even when I brought the federal funds rate back down hoping to come out of deflation, it did not work. Overall, I think the best strategy to approaching the game is tweaking the federal funds rate slightly from 4.50 until you have reached satisfying unemployment and interest rates because any drastic changes to the federal funds rate will have devastating effects on the economy and will take an immense amount of time to come out of.
I started out by trying to keep the interest rate relatively stable. This worked until inflation begin rising and reached about 7%, which is when I increased interest rates. This worked in the short term, as inflation began to decrease, but in the long term unemployment began to spike and before long I was dismissed from my duties as Fed Chairman due to high unemployment.
I started off the federal funds rate at a decently high level and that kept both the unemployment rate and inflation rate relatively stable. After I adjusted it according to the newspaper articles, It became very unstable. When I would try to work with unemployment rate, the inflation rate would go in the negatives and when I tried to control inflation rate, the unemployment rate just started to shoot up. For the most part, inflation rate and unemployment rate would always go in opposite directions.
My strategy was fairly random at first. However, I basically kept alternating spikes and troughs in my federal funds rate. In hindsight, this was probably not the best idea. After the end of my term, I was described as causing huge job loss due to "tight-fisted" policies because my federal funds rate was around 12.5% at the end of the game. My strategy kept inflation and unemployment within a relatively acceptable range at the beginning of the game, but an unexpected oil crisis completely destroyed any chance of keeping these favorable numbers.
I am a person without any strategy. At first, I did it randomly, so I can get an idea of how the game works. As I started all over, but now with a strategy, and the strategy is really bad. I set up my rate at around 10, it did not quite work, so I tried it again, but stayed at around 4-6. Nothing really much happened except for the decline of the dollar, but I manage to get back up and maintain with a 1.8% of inflation and 3.7% unemployment rate...
I focused on the headlines and reacted according to that. If the headlines were giving a warning for an inflation to come I raised the rates and vice versa. When unexpected tragedy happens resulting in huge inflation or deflation, I also made my interest rate changes just as drastic to cope with them.
I tried to keep it at a relatively close position as it was at the beginning. I was doing pretty well but then some huge oil crisis hit. What the heck, why my term? It drove up the inflation rate, which i had to then try to lower by raising the FFR to around 15%. It worked well, too well, the economy soon dropped into deflation. I was forced to make the FFR 0% and watch as deflation loosened and go back to around 1%, and unemployment dropped as well, a double bonus. However, I let it sit for a bit too long and inflation drove past the 3% rate. But unemployment was around 2%. They shouldn't have fired me.
Because of all the lags, I thought that if the changes I made were drastic enough I would have a better chance at controlling the gradual outcome. I just changed the Federal fund rate based on the charts and the newspaper headlines.
The first thing I did was set the Federal Fund rate to zero to see if that would keep the economy stable. I then went just above (about 5.0) the unemployment rate to try and lower inflation a little. Inflation continued to rise, so I set the Federal funds to 10.0, double what I had before. Inflation was still rising a bit, so I changed it to 15.0. Immediately the stock market crashed so I set Federal Fund rate back to zero and kept it there for nine months to lower the unemployment rate. Eventually it went back down so I raised the Fed Fund rate to 3.0 for six months. My problem with this was that inflation was steadily rising. So I changed it to 8.0 to try to combat a high inflation rate, the next quarter I went back to 3.0 because unemployment rate was rising. I jumped up to 10.0 because inflation was rising. Then I went to 5.0 because unemployment rate was up. I ended the game with six months of the Fed Fund rate at zero, just as I had begun the game.
My ending unemployment rate was 3.13%, under the target rate, and inflation was 2.53%, above the target rate.
The last newspaper said “Fed guru reappointed, solid policies sustain economic policy” but there weren’t like balloons or anything, so you can hardly tell if you won or not.
It was easy.. just keep the federal funds rate about 2 points above the inflation rate. at first i had to raise it a lot (about 9.0) but once i stabilized it, I was fine. Got unemployment rate to 5.38 and inflation at 2.8% which i would say is decent
In terms of keeping unemployment and interest rates as stable and acceptable as possible, moderate action should be taken. Drastic changes in the federal fund rates makes the economy go completely insane. By initially keeping the federal fund rates at around 4.50, the overall rates of interest and unemployment remain relatively stable, yet, as hints of inflation begin to rise, the federal fund rates must be increased enough to successfully curtail the inflationary results. Nevertheless, the Federal Reserve Chairman's job is definitely not an easy one. I was fired a number of times just to get a hang of it. Nevertheless, unexpected events such as the oil crisis's seem to completely destroy the competency and efficiency of a previously working strategy. Overall, after a few tries, I was able to keep inflation and unemployment rates relatively close to their acceptable thresholds.
I played this game several times. The first time, I didn't even read the instructions and I just changed the federal funds rate whenever I felt like it. That didn't work out so well. The second time, I tried to adjust the rate accordingly to try to lower inflation and keep the unemployment rate down. That didn't work out so well either. Then I wondered. What would happen if I just lowered it to zero? It worked! My inflation rate stayed stable, and the unemployment rate actually decreased. So what did I learn? 1) Trying to save the economy when you don't know what you're doing screws up the whole thing entirely. 2) Trying to save the economy when you have an idea of what will happen will also screw up the whole thing entirely. The economy is unpredictable! So 3) LEAVE IT ALONE. I like the federal funds rate at zero (:
I adjusted the federal funds according to the headlines, but it was seriously so difficult to find the balance between the proper rates for unemployment and inflation. Once I would get one at, or around, the correct average percentage the other would go crazy and go into the negatives or something! After playing the games multiple times, increasing and decreasing the federal funds a little at a time, and with a little luck, the inflation and unemployment rate finally were what they needed to be!
I started the game keeping the federal funds rate at 4.5. As inflation rose, I bumped up the federal funds rate to 5.0. The inflation rate remained relatively stable. However, unemployment began to increase. In hopes of recovering from the increased unemployment rate, I decreased the federal funds rate back down to 4.5. Unfortunately, that didn't do the trick. I, being the amateur Fed Chairman, panicked and raised the federal funds rate dramatically. Honestly, I didn't really know what I was doing, but whatever I did was not what I wanted. With the newly increased federal funds rate, my economy eventually hit deflation and unemployment continued to increase. Maybe I should have taken the headlines more seriously, and I should have known that any dramatic change would negative effects on the economy. After playing the game several times, I figured to counteract a possible inflation, increase federal funds little by little and vice versa. Even then, I didn't do so well. Needless to say, I'm not fit for the position of Fed Chairman!
It is definitely important to keep the federal fund rates steady to keep inflationary and unemployment rates steady. There was a lot of trial and error to figure out the trends as a result. Federal fund rates had to be increased in order to compensate for the increase in inflationary rates. This was definitely a difficult task to keep both inflationary rates and unemployment rates at an acceptable percentage, and I was fired many times before I was successful. After many errors, I was able to keep both rates at an acceptable percent. This is not the type of computer game I prefer!
I got thhe unemployment down to 3.93%, and inflation to 3.27%. My initial strategy was to keep interest rates quite low, around 2.5%. This drove my unemployment rate down, and the inflation up. After a couple of quarters however, some current event about energy drove my inflation rate down, so I was fine. However, much of the game was left. Since the unemployment was really low, I decided to put interest rates up now because I could afford to, and drive the inflation down. After alternating between working on unemployment rate and inflation rate, I had around 4 quarters left, and I had to maintain my rate. Then I decided to start change, and no matter what I did inflation rate went up and up, and I ended up getting fired due to the terrible last quarter.
My plan in the game was in drop inflation drastically and raise unemployment just for a bit by raising the Federal Funds rate quite above the inflation rate. Then I would bring unemployment back down and inflation back up, and have them flux like that so that the change would never be too drastic, and it would stay around the regular amount. It worked as I planned, and the inflation rate dropped to around 1%, and unemployment rose to 6.5, which was an acceptable loss. However, just as I was about to reverse it and bring them back to normal, something happened in the country, according to the newspaper, and the unemployment rate skyrocketed, with the inflation rate dropping to -1.5% no matter what I tried. Luckily, I was able to recover by setting the Federal Funds rate incredibly low. The unemployment rate dropped back down, inflation came back up to normal, and by the time I was out of quarters, unemployment was 3.92% and inflation rates were 2.54%.
My policy was to counter whatever trend was causing my inflation or unemployment to increase. I would set my fed rate wither extremely high at 10 if my inflation was too high, and I would set them at .5 if unemployment was too high. If both were where I wanted them to be, I set the rate at 2 percent. This worked until the last 5 quarters where no matter what I did inflation kept rising. This was most likely due inflation being negative earlier in the game.
I went into the game expecting typical ups and downs in the economy and with that in mind I based my strategy on a conservative goal of just meeting the averages one inflation and employment. I had success with starting out with a 420 federal funds rate.
In the beginning I tried to keep unemployment below 5% and by doing so I increased inflation. However, when I increased the federal funds, both the inflation and unemployment percentage went down significantly. For a while, my unemployment rate was below 3% and my inflation was below 2%; however, as I neared the end of the quarters available to me, the unemployment rate increased to just under 4% while the inflation rate went to 3.4%. In essence, I was able to keep the unemployment rate below 4%, but could not keep the inflation rate below 2%
I started the Fed Chairman Game by adjusting the federal funds rate in a drastic manner. This strategy did not work out too well for me, and I pretty much got fired once the inflation/unemployment rates were too high/low. After messing around with the game a couple of times I kept the federal funds rate at 4.5 percent. The inflation rate rose relatively slow while the unemployment decreased in a similar manner. I raised the federal funds rate by 1 percent. As a result, I was able to keep the unemployment and interest rates stable. Overall, I just kept the federal funds rate around 4.5 percent with moderate adjustments when necessary. The Fed Chairman’s job is not fun!
k3v1n s@b0un1 w@z h3r3
My strategy at first was to keep the unemployment rate low and hope that inflation didn't increase too much. Once the inflation rate got too high for my liking, I drastically increased the federal funds rate to steady the inflationary rate at about two percent and the unemployment rate at five percent. As the game went on I increased or decreased the federal funds rate to compensate for high unemployment or high inflationary rate. Well towards the end of the game, the inflationary rate kept going up while my unemployment rate stayed around five percent and I couldn't seem to decrease the inflationary rate with an increase in the federal funds rate. All in all I kept unemployment rates steady but the inflation rate rose to about four percent.
I played the game a couple times. At first, I read the instructions and played around with it first, increasing the federal funds rate from 4.5 to 0 to 5 to 19. The second time, I was able to keep the the inflation rate and unemployment rate close to what it needed to be. The inflation rate would increase from 2.14 moderately, and the unemployment rate would increase from 4.75 to five moderately as well. The only thing I did was keep the federal funds rate at 4.5 and it seemed to work. However, the third time I did this strategy, it did not work. Overall, the economy is unpredictable.
The game was really thought provoking. I tried to follow my initial instruction, by keeping inflation rates low and unemployment around 5%. I tried to control these two different categories by changing the the federal funds. The different headlines helped guide my strategy.
At first I followed the instructions and the economy was flowing at a good rate. After awhile I increased the federal funds rate and the inflation rate started to increase. No matter what i did the inflation rate kept on increasing. The unemployment rate, however, kept on decreasing as the inflation rate increased. I believe that controlling the federal funds rate was futile because it is impossible to discern whether the economy is flowing well or not.
It was more difficult than I thought to keep the economy stable and back to normal. I would adjust according to what the articles would say, which would influence my decision in adjusting the federal funds rates. The inverse relationship between inflation and unemployment made this game very difficult.
I played the game and actually just piked random federal fund rates. eventually, I set the rate at the highest level possible and the inflation rate and unemployment rate rose dramatically. Needless to say, I was fired at the end of my term and decided never to become the Federal Chairman ever as I grow older.
I believe this was the hardest game I had ever come across to. But I did prevail at the end. I truly think that the strategy for this game is to play around with the federal funds until there is a satisfying number of unemployment and interest rates because of the changes that will occur to the economy. But still, I thought it was a fun game.
I first started out by keeping the Federal Funds Rate at 4, then I observed the inflation rate and the unemployment rate then adjusted the Federal funds Rate from 4 to 5.50. I made use of the newspapers to help me decide whether to change the Federal Funds Rate. It was tricky to keep the unemployment rate and inflation rate at an acceptable point. If one were doing well the other rate would be doing worse. The trick that ended up slightly working was vaguely changing the federal funds rate frequently.
At the beginning, I just tested the waters by seeing what would happen as I raised and lowered the federal funds rate here and there. It kept pretty stable until an "unexpected" oil crisis hit and messed things up. From there on out, I adjusted the rates based on the headlines of the papers in an attempt to salvage the economy as best I could.
After understanding the cause and effects of increases and decreases in Federal Funds Rate, I finally got the hang of how to manipulate the Unemployment and inflation rate to where in time of rising unemployment I would have to Increase Federal funds rate well-above the inflation rate, and consequently keep in mind for unemployment rises. In the end, maintaining a stable and non-extreme-jumping method from low to high Federal funds rate and vice versa (plus some lucky turn of events) I managed to end the game with a remarkable inflation rate of 1.59% and an unemployment rate of 4.74%. Ultimately, I learned how to predict the movement of the two rates with steady manipulation of the Federal Funds rate in order to maintain the recommended rates.
First of all i failed miserably at this game. although i tried to lower the inflation rate by increasing fed rate above unemployment rate, it did int help, however i got the unemployment rate below 1.25.
First of all i failed miserably at this game. although i tried to lower the inflation rate by increasing fed rate above unemployment rate, it did int help, however i got the unemployment rate below 1.25. my strategies did not work, i tried believed increasing the fed rate would lower inflation but the inverse happened.i tried hard to get the economy back to normal but no matter what i tried i couldint find any luck.towards the end i just played with the numbers to find if anything can make the spike come down but nothing worked
First of all i failed miserably at this game. although i tried to lower the inflation rate by increasing fed rate above unemployment rate, it did int help, however i got the unemployment rate below 1.25.
At the start of the game, I played a couple round without changing the federal fund rate, and inflation increase while unemployment decreases. Later, I tried to increase the federal fund rate to 10%. Inflation and unemployment did not change at first; however, they started to change direction dramatically at around 3 round. I tried to bring the economy to normal by lowering the federal funding rate to 3%. Unemployment has gone down, but inflation seems to be impossible to be "normal" while keeping the unemployment at the normal line. I think I have failed tremendously...
I basically played the game randomly hoping that I would get some positive results. However in the end, my inflation rate kept decreasing until I was in the negatives, and my unemployment rate kept increasing. Eventually I just kept the federal fund rates at just 4.50 and barely moved up and down the rates. I liked the music.
I tested this game out. First I would increase and decrease the Federal Funds rate and see the results to observe what would happen. I realized the lower the Federal Funds rate is the higher unemployment rate is and the lower the inflation rate. I tried to keep them both at a stable level.
I tried to use the strategies that I thought were going to be useful but I ended up having unemployment at 5.5% and my inflation at 18%. I kept trying to switch up the rise and fall of both unemployment and inflation by raising one or the other when the other one was lowering to try and keep them stable
This game was fun but kind of hard. i played around with it a lot to see how it worked and the numbers i would produce but eventually i got on track and keept inflation rates low and unemployment around 6%. I controled these two things by changing them
My strategy was to prioritize the inflation rate over anything else, which seemed to work pretty well up until the oil crisis happened. After that whenever I tried to keep inflation stable unemployment went up so I shifted my focus to that for around 3 or 4 quarters. When my inflation rate reached almost -2% I finally found a balance again that would make inflation go up but unemplyment go down, but the game ended before both got to where they needed to be.
My strategy was to prioritize the inflation rate over anything else, which seemed to work pretty well up until the oil crisis happened. After that whenever I tried to keep inflation stable unemployment went up so I shifted my focus to that for around 3 or 4 quarters. When my inflation rate reached almost -2% I finally found a balance again that would make inflation go up but unemplyment go down, but the game ended before both got to where they needed to be.
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