Simulation Game
So far, I had only theoretically read about Federal Reserve altering the monetary policy by changing the interest rates in order to maintain the economic stimulus. However, the simulation game provided hands on experience about the impact of monetary policy on employment and inflation rate. For instance, a reduction in the federal rates infuses momentum in the economy and while the reduction I the interest rates fuels the employment rate, it increases the inflation rate also. Similarly, an increase in the interest rates, results an increase in unemployment while controlling the inflation rate. Therefore, the game is all about controlling the interest rates so as to keep the inflation rate and unemployment rate within an acceptable range of 2% and 5%, respectively.
Another concern, which the game failed to consider is the impact of unforeseen circumstances such as natural disasters and wars that impose a negative impact on the economy. Therefore, the Federal Reserve will have to deal with such circumstances in real life too, and alter the monetary policy accordingly because if left unnoticed, these factors can cause significant increase in unemployment or inflation, and in such situations, the economy can be left crippled.
Yes, I was reappointed, but after making three attempts to the game because initially I was not able to understand the trade-off effect of increase or decrease of the interest rates on unemployment and inflation. Therefore, it was only after making numerous tries every quarter and trying to understand the effect, I was finally able to achieve the objective of 5% unemployment and inflation around 2%.
Overall, the game was interesting and really helped me in understanding the aspects of monetary policy meticulously.
