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Evaluating Current FOMC Actions

This page authored by Shawn Abbott, College of the Siskiyous.
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This material is replicated on a number of sites as part of the SERC Pedagogic Service Project

Summary

This activity will engage students in an understanding of current monetary policy, as evidenced by FOMC communications. Prior to class, students will review the most recent FOMC statement, highlighting key findings. Upon arrival in class, students will be assigned to small groups. Each group will be assigned a role, asked to evaluate the FOMC's decision from that perspective and develop a potential Tweet to communicate a reaction to the FOMC statement. The collection of Tweets will be presented to the class, discussed and compared.

Learning Goals

Through this activity, students will discover:
- The Federal Reserve's commitment to communicating FOMC actions.
- The nature of current FOMC monetary actions.
- The extent to which FOMC actions, designed to promote broad macroeconomic goals, may impact various stakeholder groups.
- The challenges inherent in communicating complex information to a diverse audience.

Context for Use

This activity is designed for a Principles of Macroeconomics course as a final activity in the coverage of monetary policy. Given the group work component, the activity is best suited to smaller classes (up to 40 students), but could be adapted for larger classes (as an independent writing assignment). A minimum of thirty minutes is needed with the potential for expansion to fifty minutes, through variations and expanded discussion. An overhead projector or document camera is needed to project images for the class to view.

Description and Teaching Materials

The Federal Reserve, in recent years, has placed an increased emphasis on communicating monetary policy actions to the public. Communicating complex information to a diverse audience is inherently difficult. Through this activity, students will apply their knowledge of monetary policy and practice their ability to understand complex communications.
  • The Committee's current assessment of the economy (in broad terms).
  • The actions taken by the Committee.
  • The expected impact of the Committee's actions (based on the student's understanding of monetary policy).

  • Banker
  • Real Estate Developer
  • Homeowner with a variable rate mortgage
  • CEO of an automobile manufacturing corporation
  • Stockbroker
  • Retiree living on interest from a bond portfolio
  • Foreign investor
  • Company preparing to launch an IPO

VARIATION:

Teaching Notes and Tips

Given the complexity of the topic, the discussion will be most fruitful if it remains focused on the short-run impact on interest rates. As students present their Tweets, guide the comments to this key issue.
Students who did not complete the assignment prior to class should be distributed amongst the groups, and advised to "listen and learn" as their group members engage in the initial discussion.

Assessment

Include, on an exam encompassing monetary policy, the following question:

Additional short-answer questions might include:

References and Resources

N/A

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