Money Train

Topics: Monetary policy, Central bank, Federal Reserve System Pages: 2 (445 words) Published: May 11, 2013
Scenario 1
In 150 to 200 words, explain your reasoning for the way you are planning on using Reserve Requirements. Be sure to address the following:

1. How Reserve Requirements affect the economy

2. How your action will affect economic growth

3. Why it is important to increase economic growth

4. Your rationale for the use of Reserve Requirements

At the end of the game, you will be provided with this information to give to your instructor.

Answer:
If the economy is down because a NAFTA disputes has curtailed exports from economy, the Federal Reserve should lower the reserve requirements. It should reduce the amount of money banks are required to keep in the reserve and increase the amount of excess reserve. This will cause an increase in inflation. Unemployment will decrease and it will stabilize the GDP. It will increase the money supply, lower interest rates and this will cause an increase of the economy growth.

Scenario 2
In 150 to 200 words, explain your reasoning for the way you are planning on using the Discount Rate. Be sure to address the following:

1. How the Discount Rate can affect the economy

2. How your action will affect economic growth

3. Why it is important to slow economic growth

4. Your rationale for the use of the Discount Rate

At the end of the game, you will be provided with this information to give to your instructor.

Answer:
To slow the rate of economic growth because of a rise in purchases, the Federal Reserve should raise the discount rate, increase the interest rate it charges banks when they borrow money from the Federal Reserve. This will decrease the manufacturing of household electronics and therefore the will not be available for purchase. This will cause a rise in unemployment. The interest rates will increase which will decrease the rate of economic growth.

Scenario 3
In 150 to 200 words, explain your reasoning for the way you are planning on using Open Market Operations. Be sure to...
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