Living Out the FOMC Meeting –A Group Activity on Monetary Policy
Students will be put into small groups that will each represent the attendees of a FOMC meeting to study their regional economic conditions in the context of the national economy and share their thoughts on how the economy is doing and what the critical issues to be concerned about are. They will then go through the steps of a typical FOMC meeting to cast their votes and decide on the next monetary policy action. The class will see how their decision compares to the actual action taken by the Fed when the next FOMC report comes out and see what kind of impact their policy would have made on the overall economy.
Context for Use
Description and Teaching Materials
Depending on the length of the activity (one day class activity or multi-day project), students will either be given information on their current regional and national economic conditions (e.g., from the Beige Book or regional Fed websites) or asked to research these conditions on their own with suggested online resources to study together as a group. They will then discuss what their understanding of the needs and critical issues of the economy are and draft their notes on what they will present at the meeting.
Once the groups are ready, the class will go through the steps of a typical FOMC meeting, with the instructor as the Chairman, where each "attendee" group will take turns to present their analysis of the economy and particular areas of needs that the monetary policy can address.
The Chairman will share his/her comprehensive review of the economy based on the understanding of what each attendee has said and present possible action plans for the next monetary policy.
The eligible attendees will cast their votes on the policy choices and the upcoming monetary policy action will be finalized.
The class will wait for the release of the next FOMC announcement to see what the Fed actually decided to do and compare with the action decided by the class. They will then discuss what kind of impact the policy (or each of the policy if the two were different) will have on the overall economy and follow the responses throughout the semester if the time permits.
Sample Worksheet for FOMC Meeting Activity (Microsoft Word 2007 (.docx) 13kB Nov8 13)
Teaching Notes and Tips
The activity can also be made more advanced by inserting what the fiscal policy is doing concurrently and how that affects the decisions and impact of monetary policy.
In order to adapt this activity to a bigger class, instructor may consider the option of creating more than one and up to six "governor" groups, each voting separately.
Each group can either designate a spokesperson for the classwide FOMC meeting or require each group member partake in the discussion by taking charge of certain aspects of the report.
It should be noted that an actual FOMC meeting will be more complex with the district presidents presenting not only their regional economic conditions but their political inclinations as well. The activity will, for the sake of simplicity, assume away this part, but the instructor may want to discuss this issue to get students thinking and understanding the process more realistically.
References and Resources
The Beige Book discusses the current economic conditions of each of the district as well as the overall economy:
FedViews, an example of a regional Federal Reserve Bank's analysis of the economy, complete with both a narrative and graphical description of the recent state of the economy:
Fed Chairman Game provided by the Federal Reserve Bank of San Francisco that can be as an alternative: