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Can you get reelected as a Fed Chairperson: A group activity

This page is authored by Paul Briggs, Windward Community College, Kaneohe, Hawaii
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This material is replicated on a number of sites as part of the SERC Pedagogic Service Project

Summary

In this classroom activity, students play the Fed Chairman Game that is authored by the San Francisco Federal Reserve Bank. After an introductory discussion on Open Market Operations, the instructor plays the game with the entire class (my classes have 35 students typically) to show the basic structure of the game.

The second part of the activity will have students in groups (4-5 students each) play the game within their groups. After the game is played, each group reports their findings (Did they get reelected or not as Fed Chairperson?) to the entire class.

Learning Goals

Concepts-Students will understand how changes in Monetary Policy impact inflation and unemployment and how exogenous events can impact the monetary policy environment.

Content-Inflation, unemployment, Monetary Policy, exogenous events

Context for Use

This activity is designed for a beginning Macroeconomics Principles course, either at the college or high school level. While this activity can be done as a whole class activity, this particular iteration will break the class up into smaller groups of 4-5 students each. The whole activity should take about 30 minutes in length, with the whole class demonstration taking 10 minutes and the group activity taking about 20 minutes.

For the group activity, individual laptop computers are needed for each group with wireless capability necessary. Students should know the basics of open market operations before playing this game. This activity is taught as a culminating activity after teaching Monetary Policy to the students.Since the Fed Chairman game is a easy to use simulation program, it would be very easy to adapt this activity for other settings (students can play this game online for example).

One caveat though, this game was developed as a Flash program, thus it cannot be played with many mobile devices (i.e. Apple IPAD). There will be a new version of this game coming out in about 3 months (January 2014 hopefully), and it will no longer be a Flash program, and thus can be played on all mobile devices.

Description and Teaching Materials

Students will obviously need to access the Fed Chairman game.

http://sffed-education.org/chairman/

  1. Play the Fed Chairman game with the whole class to get the students used to the game.
  2. Break students up into groups of 4-5 students each.
  3. For the group activity, students will need a laptop computer for each group that is participating. I would make sure that you have the appropriate amount of laptops ahead of time. Make sure that your classroom has wireless internet connectivity. Make sure that each laptop is opened to the Fed Chairman game before giving the laptops to the groups.
  4. Have the groups select individual members to perform various functions, such as recording the choices, selecting the next quarter, reading out the shocks, asking for opinions as to what to do, and reporting to the whole class.
  5. It would be a good idea to have a recording sheet for each group, so that the group can track their reaction to the exogenous event and what the impact was on inflation and unemployment Worksheet (Microsoft Word 2007 (.docx) 67kB Oct7 13)
  6. Once the group round is over, have the groups write down their strategies of winning and losing in the following worksheet and report their findings to the whole class. Worksheet (Microsoft Word 2007 (.docx) 54kB Oct7 13)





Teaching Notes and Tips

I use the same groups of students throughout the semester for various activities, including this one. I have found that using the same groups builds a certain team chemistry that makes it easier to do novel activities. It should be noted that you do not need to have ready made groups in order to take advantage of group activity.

For a more complete discussion on forming cooperative groups, check out the Starting Point Cooperative Learning Module:

http://serc.carleton.edu/econ/cooperative/group-types.html

It might be a good idea to assign roles to each of the group members (i.e. one person tracks the activity in a worksheet, one person is the presenter, one person makes the appropriate change in the Fed Funds Rate)

In playing the Fed Chairman game, it is important to respond vigorously to exogenous events (shocks) when they appear. Do not be afraid to change the Fed Funds Rate by 4-5 percentage points in response to a shock. The goal is to maintain both low inflation and low unemployment (the dual mandate of the Fed).

There will be an oil price shock in the game. This can be a sticky situation as it is a classic stagflation (leftward shift of the AS curve) scenario. Two possible strategies are the following:

  1. If the Federal Funds Rate is already high, then lower the rate in response to the oil price shock.
  2. If the Federal Funds Rate is already low, then raise the rate in response to the oil price shock.

Assessment

While the Fed Simulation game is itself an assessment of student understanding of Monetary Policy, here are some other assessment questions:

1. How does an increase or decrease in the Fed Funds Rate affect either inflation or unemployment?

2. What would be an example of a shock that was not in the game? What would be the Fed's appropriate response to that shock?

3. How can the Fed Chairman game be made more realistic? Are there other Fed monetary tools used that the Fed Chairman game does not address?

References and Resources

There are other SERC activities that describe the Fed Chairman Game:

http://serc.carleton.edu/econ/2yc/activities/71610.html

http://serc.carleton.edu/econ/2yc/activities/71044.html

These activities focus on different applications of the Fed Chairman Game.

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