The game simulation requires the specific knowledge of macroeconomic concepts. It shows how the decisions made by Chairman of Federal Reserve System affect the general well-being of the economy. The game clearly displays the process of monetary policy and how inflation and unemployment are interconnected between each other, i.e. policies that aim at curbing unemployment may result in high inflation. Given that there is always a trade-off between inflation and unemployment. The task of Chairman is to keep both inflation and unemployment at normal rate, which is complicated by the fact that all economic conditions and events occur at the same time.
As we are not living in a closed economy, all the external factors coming from international trade may affect economic condition of the country. It can be oil-shocks caused by OPEC countries, as an example. Such external factors can lead to inflation; fall in dollar value, i.e. depreciation, recessionary as well as excessionary gaps in the economy. The decisions made by the Chairman are generally based on the expectations and forecasts. The ability to pursue right policy in advance can sustain the economy.
The theoretical framework gives a better understanding of how monetary policy works, and it is not as easy as it seems at first. My policies were based on inactive involvement in the economy, taking into account the newspaper headings that revealed common expectations. If the inflation fears were high, I significantly increased federal funds rate to keep inflation rate stable. It is important, however, to consider unemployment too, because inflation and unemployment move in the opposite direction to each other. I was reappointed several times, because I took into account the concepts learned and the basis of monetary policy, which helped me to keep both unemployment and inflation rate below target line.
