Top Tips for the Fed Chairman Game:
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Inflation can be lowered when the federal funds are set higher, but this will also temporarily increase unemployment.
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Unemployment rates can be lowered by setting the federal funds close to or below the inflation rate.
Pause Points:
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After the first three month period has passed, pause the game. Draw students’ attention to the delay between rate changes and the effect on unemployment and inflation. What happens if a second change is made too quickly?
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Pause again after the first year has passed and allow students to make additional inferences about the relationship between the federal funds and unemployment/inflation rates.
Misconceptions:
- Students may not realize that world events can have a huge influence on the economy, so the inflation rate has to be constantly adjusted. Help students analyze how different types of events require an increase in inflation and which cause a decrease (and why.)
