Monetary Policy Game

"So you want to be in charge of monetary policy? Think you have what is takes to steer our country's central bank? See how it works by taking charge of a simulated economy."

The San Francisco Fed has an online game to explore monetary policy. The player sets interest rates to try to keep unemployment and inflation at their target levels. Assorted shocks, like a tax cut or an oil crisis, create turmoil and the Fed can respond by raising or lowering interest rates. A round takes about 2 minutes to complete and the game can be replayed (different shocks will appear in different rounds.)

The game also has a "learn more" section that discusses the Fed's policy tools, has a series of short videos on past policy, and includes a glossary of economic terms.


http://www.frbsf.org/education/activities/chairman/index.html

Thanks to Philip Mulder for sharing this resource.

Visualizing unemployment

The American Observer shows the dynamics of unemployment during this recession:
The Decline: The Geography of a Recession




http://cohort11.americanobserver.net/latoyaegwuekwe/multimediafinal.html

Can learning about the Federal Budget be fun?

Budget Hero from American Public Radio's Marketplace lets students adjust spending and taxes in a colorful interactive budget game. It's available free at
http://marketplace.publicradio.org/features/budget_hero/

Economic Education: Key to U.S. Prosperity

The following editorial was sent to me by one of our Board members, Ron Story. I personally heard Mr. Horne make these same remarks at the National Summit on Economic Literacy in Washington D.C. this past February. At that time I turned to my colleague, as he was turning my way, and our light bulbs went on simultaneously! Mr. Horne's comments was like a lightning bolt to our brains.

I have written in the past about the importance of solid economics teaching in our schools. But Mr. Horne nails why it is absolutely critical for our economics teaching to be needed, and quality. He (with an excellent quote from Alan Greenspan) makes the case precisely. As the carriers of the economic education torch, it is imperative for us to continue the fight against economic illiteracy.

Economic education: key to u.s prosperity

Tom Horne "My Turn"
The writer is Arizona's superintendent of public
instruction.

A mother called her son at college to tell him that he had overdrawn his bank account. "That's funny," he said: "I still have lots of checks left."
The story is apocryphal and exaggerated, but the problem is real: Many students have graduated from high school without the financial knowledge needed to cope with the modern world.
This shows in the current mortgage crisis, where people bought houses they could not afford, or failed to understand the mortgages that they signed. Not only they, but also the whole country, are now suffering as a result.
When we increased graduation requirements, there was a lot of coverage about the increase in the math and science requirements. Few noted that there was an increase in social studies requirements to three years: one year of World History, one year of American History, a half year of Government and a half year of Economics. The economics requirement will be crucial to help students' prepare for the financial decisions that they will be making as adults. But even more important is the basic knowledge of economics that our citizens must have if our country is to have a successful economic future.
This is because citizens who are not educated on how free-market economy works become vulnerable to the appeals of demagogic economic populists. In his recent book, Alan Greenspan has a good discussion of this problem:
" ... Market capitalism is a broad abstraction that doesn't always conform to untutored views of the way economies work. I presume markets are accepted because of their long history of creating wealth. Nonetheless, as people often complain to me: I don't know how it works, and it always seems to teeter on the edge of chaos. . . ' ".
"Economic populism imagines a more straightforward world, in which a conceptual framework seems a distraction from evident and pressing need. Its principles are simple. If there is unemployment then the government should hire the unemployed. If money is tight and interest rates as a consequence are high, the government should put a cap on rates or print more money. If imported goods are threatening jobs, stop the imports.'" .
Early in the 20th century, Argentina had a prosperous economy, similar to Europe's. But then an economic populist, Juan Peron, got elected and wrecked the economy, making Argentina a very poor country ever since.
This could happen in the United States.
Greenspan predicts that by 2030 our country's gross domestic product will be three-fourths higher than it is now. But he has four "wild cards" that could prevent this: (1) a nuclear detonation on U.S. soil; (2) a flu pandemic, (3} failure to agree on a non-inflationary solution to Medicare's physical imbalance and (4) a dramatic revival of protectionism.
An economically uneducated population is especially vulnerable to an economic populist who could ruin America's economy, as Peron ruined Argentina's economy.
In Arizona, we are doing our part now by requiring that all of our high-school graduates are educated in economics.

Economic slowdown and the teachable moment

Is a recession good for economics instruction?

Several years ago when Michigan's economy was booming, it was hard to convince students that the business cycle was a real phenomenon and that it was worth spending time studying macroeconomic models to understand recession. The concept of unemployment seemed like a quaint historic vestige.

Today, unemployment, economic slowdown, financial crises, and recession are regularly in the headlines. This is certainly unfortunate for the economy and for Michigan's workers and families but it does raise the level of interest in macroeconomic issues. My students have been noticeably more interested in understanding the causes of economic slowdown and possible policy responses.

The news also brings regular examples of policy responses: tax rebates to stimulate consumer spending, interest rate cuts to stimulate investment. What more could an economist want?

Well, as a citizen, I prefer economic good times, but as a teacher I'll take advantage of our current doldrums to emphasize the importance of the understanding macroeconomics.