# Macroeconomic Game for the Classroom — Steer the Economy Source: https://decka.dev/classroom/economics/macroeconomic-game Students are dealt onto interest-rate committees in the order they join, each steering one country for eight years. Every member votes a rate each year, a labelled textbook model turns the committee's middle vote into unemployment and inflation, and every country moves at once on the big screen as each year lands. ## What it teaches Students see from their own countries that low unemployment can be bought with inflation only while people do not expect it: once expectations catch up, unemployment drifts back to the natural rate and the inflation stays. They meet the lag between setting a rate and its effect, and a supply shock that raises inflation and unemployment together, which no one rate can fix. ## Run a macroeconomic game with the whole class Steer the economy makes the room a set of central banks. When you seat the committees, everyone who has joined is dealt, in the order they joined, into committees of at least four, and each committee steers one fictional country, Country 1, Country 2 and so on, for eight years. Every member votes a rate each year, from 0% to 15%, and the committee's rate is its middle vote: with an even number of votes, the average of the middle two. A member who does not vote is left out of it, and a committee with no votes holds last year's rate, which its phones say before the votes close. Each country's economy is a model, and every screen says so: the textbook three-equation model, with an IS curve whose real interest rate bites a year later, an expectations-augmented Phillips curve and Okun's law. People expect this year's inflation to be last year's, output above its potential pushes inflation up, and unemployment falls as output rises. Year 1 runs on the 4% every country starts with. The model also has a capacity law: an economy cannot run more than 4% above potential, and where that binds the big screen draws a wall beside the country's point. Each year opens with its news, the same for every country, and a year closes when every member has voted, when its clock runs out, or when you press “Close year 3's votes now”, which shows how many have voted. Then the rates the committees set land on a strip, every country moves at once on the big screen's plane, unemployment across and inflation up, and its path inks behind it. The room's words say what the data did, and they name a shock only when every country moved its way. “Open year 4” opens the next year. After year 8 the model's short-run lines are drawn, one for each inflation people might expect, then one vertical line at the model's natural rate of unemployment, 5%, with the band within one point of it shaded: the long run. The verdict counts the countries that ended near it and gives the range of their inflation. A last step ranks the countries by points off target, fewest first. The big screen shows countries, never members: each country's number and its model economy, and the rates the committees set. Each phone shows only its own country: the dashboard its committee decides from, the rate it set and what that rate did a year later, and at the end its decade and its place. Try the screen-and-phone preview: the phone is yours, on Country 2's committee, and fictional classmates on six committees vote through the same runtime as the lesson. A note for the teacher, with what the room meets year by year. Years 1 and 2 are quiet, with a government that wants unemployment under 4% before its election in year 4. In year 3 oil prices double: three points on inflation and two off output, so inflation and unemployment rise together. In year 6 the banks stop lending, three points off output, and they lend again in year 7. The oil shock echoes the 1970s, and a committee that fights its inflation hard meets the recession Paul Volcker's Federal Reserve chose to end it. The room's countries are fictional, and no screen or phone names a real central bank. ## Classroom debrief Which countries ended with the highest inflation? What did their committees do before the election? Did any country hold unemployment under 5% for more than two years? What did it cost by year 8? After the oil shock, inflation and unemployment rose together. Which did your committee fight, and why could no rate fix both? If your committee raised its rate, in which year did unemployment respond? Where is the vertical line, and why do countries drift back towards it? If one has not, what is holding it away? ## Macroeconomic game questions, answered ### Is this a real economy? No. Every number on the screens and the phones is a model's, labelled Model with its notice: “A three-equation textbook model. Real economies have more channels and longer, variable lags. In it, an economy cannot run more than 4% above potential.” The countries are fictional. ### Why is the long-run line vertical? Because in the long run people expect the inflation they get. In the model, expected inflation is last year's, so a committee can hold unemployment below 5% only by making inflation rise year after year. Once inflation stops rising, unemployment returns to 5%, the natural rate, at whatever inflation the country has reached, so every inflation rate meets the long run at the same unemployment. Each short-run line is the trade-off at one expected inflation. ### What is the capacity law? A law of the model: output cannot run more than 4% above its potential, as the notice says, or more than 10% below it, so unemployment stays between 3% and 10%. Where a country hits it, the big screen draws a wall beside its point, the room's words say so and its phone marks the year in bold. It is part of the model's equations, never a limit on the votes: any rate from 0% to 15% is accepted. ### What are points off target, and why not the misery index? Each year adds (inflation − 2)² + (unemployment − 5)² to a country's points: how far it was from the 2% inflation target and the 5% natural rate, each squared, so one big miss costs more than two small ones. Fewer is better. The textbook misery index is a different number, inflation plus unemployment, so the lesson never uses that name. ### What if a committee doesn't vote? A member who doesn't vote is left out of the middle vote. If nobody on a committee votes, it holds last year's rate: its phones say what it will hold before the votes close, the strip counts it as held and the room's words name it. ### Can I change the settings? Yes: every word on the screens and the phones, how long each year's votes stay open (three minutes by default) and the committees' sizes (four by default). The model and its parameters, the years' shocks and the number of years stay as the lesson writes them, because the long run the room finds depends on them. ### What does Decka keep about the class? Counts and model positions only: how many voted each year and how many did not, how many committees formed, how many stood by and how many held, and each country's position on the plane by its number, with the rates' strip and the room's words. No names, no member's vote and no committee's members are kept. ### How long does it take? A short brief, eight years each with its votes and its landing, then the long run and the places; the saved default shows under the headline as "About N min", and every timer is a setting you control before you run it. ## Run the lesson Present the boards in PowerPoint and Decka. Students scan a QR code or open the session link to join from their phone browsers.