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Data-based Active Learningin the Principles ofMacroeconomics Course: AMock FOMC MeetingCathleen Whiting aa Willamette UniversityPublished online: 07 Aug 2010.

To cite this article: Cathleen Whiting (2006) Data-based Active Learning in thePrinciples of Macroeconomics Course: A Mock FOMC Meeting, The Journal of EconomicEducation, 37:2, 171-177, DOI: 10.3200/JECE.37.2.171-177

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Spring 2006 171

Data-based Active Learning in thePrinciples of MacroeconomicsCourse: A Mock FOMC Meeting

Cathleen Whiting

Abstract: The author presents an active-learning exercise for the introductory

macroeconomics class in which students participate in a mock Federal Open

Market Committee (FOMC) meeting. Preparation involves data gathering and

writing both a research report and a policy recommendation. An FOMC meeting

is simulated in which students give their policy recommendations, participate in

deliberation, and vote on policy. This exercise fosters engagement across diverse

groups of students at the introductory level as it develops proficiencies desired for

economics majors.

Key words: active learning, macroeconomic data, monetary policy, teaching

undergraduates

JEL codes: A22, C82, E52

Much has been written over the past decade or so on the subject of improving

economic education beyond the traditional “chalk and talk” style that still domi-

nates instruction in our discipline (e.g., Becker and Watts 2001a, 2001b).

Increasing attention has been devoted to the alternative of active-learning peda-

gogy and to the importance of writing and speaking as modes of learning (Cohen

and Spencer 1993; Greenlaw and DeLoach 2003; Hansen 1998; Hansen and

Salemi 1998; Salemi 2002). Nonetheless, the lecture method remains the method

of choice for economic instruction (Becker and Watts 2001b).

This is unfortunate. The passive learning environment engendered by the lec-

ture method is ill-suited to spark student interest and create enthusiasm for what

economics has to offer. An active-learning pedagogy requires students to confront

directly the complexity of real-world economic events within the appropriate the-

oretical framework. As Perry et al. (1996, 77) noted, “The active learning process

transcends basic comprehension and memorization, focusing instead on the

examination, analysis, evaluation, and application of course-related concepts.”

Moreover, the analytics we economists teach are more effectively internalized

when we succeed in engaging the students’ interest, so they continue to “think

like an economist” (Siegfried et al. 1991) long after they leave our classroom.

Such techniques are ideal for the principles course, where any given class might

Cathleen Whiting is an associate professor of economics at Willamette University (e-mail:cwhiting@willamette.edu). Copyright © 2006 Heldref Publications

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include freshmen economics majors and seniors majoring in chemistry. The chal-

lenge is to engage these disparate groups while providing majors with the skills

required to advance through the economics curriculum (Siegfried et al. 1991).

Student interest can be piqued and curiosity generated when one makes it clear

that what might otherwise appear to be abstract theoretical analysis has immedi-

ate and useful application. The ready availability of macroeconomic data on the

Internet (Goffe and Braden 2000) provides opportunities unheard of a generation

ago for a macroeconomics instructor to do just that by linking the theoretical

models to the real world of students’ knowledge and experience. By effectively

using up-to-date data and making them accessible to the students within the con-

text of classroom models, one can engage them as macroeconomists, even at the

principles level.

In this article, I present an active-learning classroom exercise developed for an

introductory macroeconomics course. It achieves a number of instructional goals,

foremost among which is that it fosters direct student engagement among the

diverse groups of principles students while it develops competency in analyzing

real-world macroeconomic issues. It integrates writing into the curriculum in a

manner that “reinforce[s] the process of mastering the content knowledge of eco-

nomics and internalizing the skills of economic reasoning and analysis” (Hansen

1998, 79), and it contributes to the development of at least four of the five profi-

ciencies developed by Hansen (1986): accessing, displaying command of, inter-

preting, and using existing knowledge. In this exercise, the “existing knowledge”

is economic data, interpreted and applied through the macroeconomic models

developed in class.

Students in my macro principles course are told at the beginning of the semes-

ter that during the 12th week, one class period will be devoted to a mock Federal

Open Market Committee (FOMC) meeting. So they know what will be expected,

I hand out the assignment during that first week. Each student will represent a

voting member of the FOMC, with modifications to the actual voting process to

accommodate class size. Each will come to the meeting prepared with individual

research and writing to present an analysis of the state of the economy, give a pol-

icy recommendation, participate in general deliberation after hearing from each

member, and then vote on interest rate policy. Preparation for the meeting culmi-

nates in two written documents, to be submitted before the meeting begins: a

research report presenting trends in the data for what the student considers

relevant variables and a policy proposal that integrates the data into the macro

models developed during the semester. Details of this assignment are given in the

appendix.

BACKGROUND

Even by the senior research seminar, the capstone course for the major in our

department, students often have little or no idea where to obtain basic economic

data series, such as gross domestic product (GDP) or interest rate figures. I initially

created the FOMC exercise as a way to get students thinking in terms of eco-

nomic data at an early stage and to familiarize them with the kinds of data that

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are available. By way of preparation, I list on the syllabus several online and

printed data sources.1 On the first day of class, I point these out and encourage

students to explore them. To give “teeth” to that encouragement, I assign an

“Introductory Homework: Gathering Macro Statistics” in which they are asked to

find particular pieces of data (e.g., real GDP, Treasury bill rate, inflation and

unemployment rates) for specified time periods. Although all data are readily

available through the sources listed, students typically find this initial foray into

data gathering challenging and seem to require the week I give them for the

assignment. This seemingly simple exercise has proven to be a useful preparatory

assignment that serves the dual function of orienting students toward real-world

data at the beginning of the semester and of acquainting them with data sources.

As the semester progresses, I work additional data-gathering exercises into the

course material where relevant. Students are asked, for example, to track the

movement of an exchange rate of their choice throughout the semester. At the end

of the semester, I incorporate those exchange rates into classroom exercises.

When the class develops nominal and real interest rates, the students are asked to

find and graph a time series of Treasury bill and inflation rates over a specified

interval and use these rates to calculate and graph the ex post real rates over that

interval. Having completed the exercise, each student has this data set available

for reference throughout the rest of the semester. Encouraging the use of Excel

minimizes the busywork aspect of these exercises.

FOMC PROJECT: RESEARCH REPORT AND POLICY PROPOSAL

Some comments are in order here to augment the details. By the time students

begin their research, the aggregate demand (AD) and aggregate supply (AS)

model and the Keynesian aggregate expenditure model have been developed (the

actual assignment is provided in the appendix). The students’ task is to research

data that would enable them to predict movements in AD and AS in the immedi-

ate future. Students are typically uneasy at being asked to decide for themselves

what data to include. I repeat the encouragement given in the written assignment

to read the minutes of the last FOMC meeting and the Federal Reserve Monetary

Report to the Congress for ideas. The better papers go beyond unemployment and

inflation rates and the consumer confidence index to include several indicators of

the strength of aggregate demand (e.g., housing and construction activity, retail

sales, durable goods orders, industrial production) and such indicators of aggre-

gate supply as energy costs and productivity trends.

The policy proposal asks them to analyze their data in the context of the mod-

els. This can require dealing with real-world ambiguity. For example, if retail

sales have been unusually strong, but durable goods orders have recently fallen

and unemployment has increased, they have to decide what these events augur for

future AD. They are expected to make a plausible case for their predictions, sup-

porting the verbal argument with the appropriate graphic illustrations, then pro-

pose an appropriate monetary policy response. This can involve bringing to bear

any other factors that might affect their view of appropriate policy (e.g., argu-

ments for and against activism).

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To the extent that the timing of the due date is flexible, it is best to schedule it

shortly before an actual FOMC meeting. This generates a great deal of student

interest in the actual event, and it avoids the influence on the students’ policy pro-

posals that would occur if the FOMC meets shortly before the due date. If the

actual meeting occurs early in the semester, calling it to the students’ attention

and having them read the FOMC statement on the Federal Reserve Web site add

interest to their upcoming project and helps make the project a unifying theme of

the course.

FOMC PROJECT: MEETING

The day of the meeting, the classroom has been rearranged with tables in a

large circle or rectangle. Each place has a card visible to others with the name of

a Federal Reserve bank president and his or her district or the name of a member

of the board of governors other than the chairman.2 For classes larger than 18, the

names of other individuals present at the last FOMC meeting can also be

included, along with their titles.3

Each student is expected to speak for two minutes, summarizing her or his

research results and proposing a policy. If someone else has already presented

similar data, the student is nonetheless expected to make a full presentation, with

allusion to the colleague’s comments. After all students have presented, discus-

sion takes place during the remaining time, and the group votes at the end of the

class period. My role throughout the session is to call the meeting to order, keep

track of time, ensure that all who want to speak have a chance to participate in the

discussion, and call the vote.4

Students inevitably get caught up in the spirit of the role-playing, and the ensu-

ing discussion can be the most fruitful part of the exercise. It is well worth ensur-

ing that ample time is provided. Participation is generally widespread, and the

discussion takes place on a surprisingly sophisticated level for an introductory

class. Students assess and respond to others’ arguments and defend or modify

their own, based on their understanding of the analytics as applied to the data.

Because they are speaking extemporaneously, their responses demonstrate the

extent to which they have internalized course material. During that session, I am

always impressed at the extent to which they seem to have become macroecono-

mists. The topics brought up and the nature of the debate parallel what one would

expect in an actual FOMC meeting. In fact, their final decisions when the vote is

taken have to date been the same as the actual decisions made when the Open

Market Committee has met before the end of the semester. This outcome is

inevitably greeted with enthusiasm by the class when they learn the decision.

SUMMARY COMMENTS

The data gathering, writing, and discussion involved in this project all con-

tribute to developing the student’s ability to access, display command of, inter-

pret, and use existing knowledge. The process of preparing the two written

documents requires students to integrate the models developed in class into a

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coherent whole and incorporate real-world data into those models. The extempo-

raneous discussion requires them to have internalized the material sufficiently to

analyze others’ arguments as they defend and modify their own.

This is in contrast to the outcome of the lecture-based method of instruction.

No matter how skilled the lecturer, the process of dispensing knowledge allows

the student to be a passive recipient of that knowledge. Even for those students

who think they understand the material well, there is typically a difficult transi-

tion between knowing what has been dispensed by the professor and textbook

author and being able to use that knowledge to generate their own results. It is

telling that, at the outset of this exercise, even the best students often express

apprehension at the data-gathering aspect of this project. For those students who

rise to the challenge, and most do, it seems to be a highly rewarding experience,

as judged from their comments to me and what seems to be their personal invest-

ment in the outcome of the policy discussion. It is also rewarding from my per-

spective, as I see the meeting bring together those disparate groups of students

into a class of budding macroeconomists.

NOTES

1. Some of the key URLs from the syllabus are given below. The Dismal Scientist Web site, nor-mally requiring a paid subscription, can be made available to a class at no charge.

Resources for economists at http://rfe.wustl.edu/EconFAQ.html The Dismal Scientist at http://www.economy.com/dismal/ FREDII (St. Louis Fed database) at http://research.stlouisfed.org/fred2/Federal Reserve, Board of Governors at http://www.federalreserve.govEconomagic at www.economagic.comInflation data at http://inflationdata.com/Inflation/default.asp

2. No one gets to play former Federal Reserve Chairman Alan Greenspan. 3. This project has the ancillary benefit of familiarizing students with some of the institutional

details of the FOMC.4. If the class is too large for each student to have two minutes, with time left over for discussion,

I divide it into two sections and hold two separate meetings over two days. Half the studentsattend the first day and half the second. To preserve equity, all papers are due the first day.

REFERENCES

Becker, W. E., and M. Watts. 2001a. Teaching economics at the start of the 21st century: Still chalk-and-talk. American Economic Review 91 (May) 446–51.

_________. 2001b. Teaching methods in U.S. undergraduate economics courses. Journal of EconomicEducation 32 (Summer): 269–79.

Cohen, A. J., and J. Spencer. 1993. Using writing across the curriculum in economics: Is taking theplunge worth it? Journal of Economic Education 24 (Summer): 219–30.

Goffe, W. L., and E. Braden. 2000. Resources for economists on the Internet. Journal of EconomicEducation 31 (Winter): 8.

Greenlaw, S. A., and S. B. DeLoach. 2003. Teaching critical thinking with electronic discussion.Journal of Economic Education 34 (Winter): 36–52.

_________. 1986. What knowledge is most worth knowing—for economics majors? American EconomicReview 76 (May): 149–52.

Hansen, W. L. 1998. Integrating the practice of writing into economics instruction. In TeachingEconomics to Undergraduates, eds., W. Becker and M. Watts. Cheltenham. 79. UK: Edward Elgar.

Hansen, W. L., and M. K. Salemi. 1998. Improving classroom discussion in economics courses. InTeaching undergraduate economics: A handbook for instructors. eds., W. Walstad and P. Saunders.207–26. Boston: Irwin/McGraw-Hill.

Perry, N. W., M. T. Huss, B. D. McAuliff, and J. M. Galas. 1996. An active-learning approach toteaching the undergraduate psychology and law course. Teaching of Psychology 23 (2): 76–81.

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Salemi, M. K. 2002. Targeting teaching: An illustrated case for active learning. Southern EconomicJournal 68 (3): 721–31.

Siegfried, J. J., R. L. Bartlett, W. L. Hansen, A. C. Kelley, D. N. McClosky, and T. H. Tietenberg.1991. The status and prospects of the economics major. Journal of Economic Education 22(Summer): 197–224.

APPENDIX: HANDOUT FOR FEDERAL OPEN MARKET COMMITTEE(FOMC) ASSIGNMENT

Mock FOMC Meeting

You will note on your syllabus that a “Fed exercise” is scheduled for the 12th week. I’mhanding out a description of that exercise now so you will know what to expect and canbegin to prepare by acquainting yourself with data sources and keeping track of macro-economic news during the semester.

On a day to be announced, we will hold a mock FOMC meeting in class. Each ofyou will come to the meeting in the role of a member of the board of governors of theFederal Reserve or one of the presidents of the district Federal Reserve banks. Thatrole (e.g., President of the San Francisco Fed) will be determined when you arrive. Youwill each come to the meeting with two written documents prepared by your “staffanalyst”: a research report detailing the economic data that would help the Fed makean interest-rate policy decision and a policy paper. Details of these documents aredescribed below. At the meeting, you will each give your policy recommendation,supporting your recommendation with a brief summary of the data that led to your recommendation. Each person’s statement must be limited to two minutes, in order toleave time for everyone to make a statement and have time for some general discus-sion and a vote afterward.

In preparing your policy recommendation, think about the relative effects of unem-ployment and inflation. Each member of the FOMC brings to the discussion his or her ownweighting of that potential tradeoff. You should do so, also.

Supporting Documents

In preparing your supporting documents, assume the role of a staff analyst for the per-son whose role you will play in the meeting. In fact, individual Federal Reserve bank pres-idents would represent their districts; for our purposes, each of you will focus onnationwide data in preparing your report and analysis.

1. Research reportThis report gives details about current economic data and recent trends that members of

the FOMC would use in making a policy recommendation. For example, if you are report-ing on the Consumer Confidence Index, you would provide data showing what the indexhas done over, say, for example, the past year, and note its most recent pattern. The datayou use in preparing this report would include, but not be limited to, leading economicindicators. I strongly recommend that you read the minutes of the last FOMC meeting anda recent “Monetary Report to the Congress” to get a realistic idea of what data the FederalReserve considers and how it uses that data. These documents are readily available throughsome of the Web sites I’ve listed on your syllabus.

Remember that the FOMC member for whom you are preparing your report wants tobe able to predict the immediate future as accurately as possible and to make the mostappropriate policy recommendation. To that end, the data you present should be accompa-nied by a brief verbal indication of its usefulness and how it fits in with other data to pre-dict movements in aggregate demand and/or aggregate supply. If, for example, theConsumer Confidence Index has declined, you would offer this as a piece of evidence

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which, together with other trends you have outlined, would enable your FOMC member topredict future changes in aggregate demand.

This report should be approximately 2–3 pages in length, typewritten, and double-spaced.

SourcesBy now you should be familiar with the Web sites on your syllabus. Good places to start

would include “Resources for economists,” the “Dismal Scientist,” and the board of gov-ernors and the various Federal Reserve branch sites. You should plan to spend a good dealof time researching these sites to learn what data are available. The Wall Street Journal is,of course, a great resource to follow over the course of the semester.

2. Policy paperIn this paper, you make your policy recommendation and support it with the appropri-

ate theoretical models as applied to the data presented in your research report. This paperwill contain two parts: a “core theory” section laying out the theoretical models that enableyou to predict the effect of a given Fed policy, and a section that applies that theory to thecurrent situation. Your core theory section should contain both graphical and verbal analy-sis, using the model of the money market, the Keynesian AE model, and the AD/AS modelto trace through the effect of your policy recommendation. Having laid out the theory, usethe data presented in your research report to indicate where the economy is currently,where it seems to be heading, and why—in light of this analysis—your policy recommen-dation is justified.

This paper should be approximately 3–4 pages, including graphs.

Citing Sources

Cite all sources carefully and thoroughly and be sure that what you write is in your ownwords. All Web sites should be cited with the complete address, so the interested readercan go immediately to the source. Any work that reproduces too closely an Internet orother published source without adequate attribution will be dealt with through the appro-priate disciplinary process.

Spring 2006 177

CALL FOR PROPOSALS FOR POSTER SESSION ASSA JANUARY 2007

The American Economic Association’s Committee on Economic Education

will sponsor a poster session at the 2007 ASSA Meetings in Chicago devoted

to active learning strategies across the economics curriculum. Instead of

papers, session presenters will prepare large visual summaries of their work

mounted in an exhibition room to allow presenters to talk directly with par-

ticipants. Although we encourage presenters to include evidence that their

strategy enhances learning, we do not require quantifiable evidence.

Presenters should emphasize the originality of their strategy and provide suf-

ficient information so that participants may apply the technique in their own

classrooms. Suggested proposals should describe the teaching strategy and

explain how it will be described in the poster. Proposals are limited to two

pages and are due by 15 May 2006. Please send proposals to: Rae Jean B.

Goodman, Economics Department, U.S. Naval Academy. 589 McNair Road,

Annapolis, MD 21402-5030. Phone: 410-293-6891; Fax: 410-293-6899;

E-mail: Goodman@usna.edu.

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