The San Francisco branch of the U.S. Federal Reserve puts you in the shoes of the Fed Chairman with an online game where you set U.S. monetary policy via the level of the federal funds rate while the economy throws inflationary and deflationary shoes at you!
Our results:
We had the U.S. dollar plummet in value during our tenure as imaginary Fed Chairman, sparking off a bout of deflation. Our solution was to initially cut interest rates to a level between 1% and 2%, but to tolerate a low level of deflation, with the inflation rate dropping into negative territory between 0% and -1.5%. As deflation subsided, we slowly and steadily increased the federal funds rate target to ensure that inflation was kept at bay.
HT: Craig Newmark
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