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Sample Policy Questions

All teams are also strongly encouraged to think through answers to the following advance policy questions. Judges are required to ask at least one of them:

  • Some economists argue that the economy is self-correcting and there is no need for active monetary policy. Explain their argument. What are the best arguments against this view?

  • What are the Fed's most important goals? Explain why each of these goals is important.

  • Some people think that the Fed's only goal should be price stability. What are the arguments for and against this view?

  • What is the "output gap" and how does the Fed use the output gap in its monetary policy decisions?

  • Discuss the concept of NAIRU (non-accelerating inflation rate of unemployment). How should the Fed pay attention to the concept of NAIRU in its policymaking?

  • In making decisions about U.S. monetary policy, in what ways should the Fed take into account the health of economies in other countries?

  • What is the difference between fiscal policy and monetary policy? How does fiscal policy affect output? In what ways does fiscal policy affect monetary policy decisions?

  • How does the policy of raising or lowering the federal funds rate affect output, employment, and inflation?

  • What actions can the Fed take to stimulate the economy when the federal funds rate is close to zero?

  • The Federal Reserve has recently used nontraditional policies, resulting in an expansion of the Fed’s balance sheet.  What are the risks of these nontraditional policies and what are some exit strategies?

  • What is the role of inflation expectations in determining inflation? How can a central bank influence inflation expectations?