Please respond to this post in 5 sentences or more. This was the discussion question:
- Go to http://sffed-education.org/chairman. Use the Learn More button and review the tight (contractionary) and easy (expansionary) tools of the Fed as well as the use of each. Briefly examine the Economic Dictionary and the Policy in Depth features.
- Now play the game! You are the Fed Chairperson! You begin with 16 quarters, 4 years, and then your job is up for review. You begin with rates at 4.5, inflation at 2.14% and unemployment at 4.75%.
- Make decisions on interest rates for the 16 quarters. Summarize the changes you chose and explain your results. Do you still have a job? Why or why not?
- How does this game relate to real life? Think about inflation, interest rate, your job, pay raises, etc.
This game was a difficult and each time I lost my job. I started to get the hang of it, but did not have enough quarters left to bring unemployment and inflation rates back to the desired percentages. I understand a little more after reading and playing this game, how difficult it is to control both unemployment and inflation. Though unemployment and inflation should be complementary in normal times, when they both start working against each other it is difficult to get them back under control. I made some mistakes in the beginning of my term which made it hard to bounce back from later on. When my inflation rose too high (over 10%) I added more to the fed fund (near 20) to get it back under control, but then my unemployment rose higher. When I lowered my fed funds to near 0%, the unemployment dropped but I didn’t have enough time to recover before my term was over.
This game mirrors real life in that decisions made by monetary policies have a great effect on our economy. Though we are recovering the effects of the Great Recession of 2007 can still be felt today. During that the when unemployment was at its highest, the fed rate was reduced to zero to help balance out the economy. It’s been a decade and we are now getting closer to the natural unemployment rate and inflation rate.