Fed Challenge Judges' Questions and Answers

The following questions are from the district and national competitions. Some of these questions are basic questions that are likely to come up again. Others are based on teams' presentations or follow-up questions to teams' answers to other questions.

District Comptetition | National Competition

District Competition

• What is the fed funds rate? Why and how does the Fed use it?

• Money Supply - How does the Fed manage it?

• What is the Fed's role in counteracting inflation shock due to oil prices?

• Oil shock is short tem, why do we look at core PCE?

• Why use core CPI or PCE since everyone spends for food and energy?

• How much of consumer confidence and spending is war concern?

• What has been the response of the FOMC to prolonged slow growth?

• At the last FOMC, we dropped the balance of risks statement. How will the market interpret the balance of risks statement being put back in?

• Should the Fed be concerned about fluctuations in the stock market? Explain.

• Discuss the implications of a federal funds rate of zero. What are the implications for money growth?

• Explain the federal funds market. What is it? How does it work?

• If the housing market collapsed, how might the Fed respond? Are we in a real estate bubble?

• What might the Fed do if our economy experienced deflation?

• What are the basic objectives of the Fed?

• If oil prices rise, does that change the nature of policy?

• What is a liquidity trap? What is an equity trap?

• Does consumer confidence parallel consumer spending?

• Is there a disconnect between housing starts and consumer confidence?

• In what way do you use leading indicators to forecast economic conditions?

• How important is what happens in stock market?

• Sometimes the Fed is criticized for being too concerned about inflation and not concerned enough with full employment. What's your response?

• What, numerically, is long-run growth?

• If housing starts to soften, would it change your decision?

• If unemployment is a lagging indicator, should the Fed be concerned about it at this time and, if so, why?

• One of the goals of the Fed is sustained long-term growth. What's the number you'd use to describe long-term growth for the U.S. economy?

• The Fed targets the federal funds rate. What's the connection between that rate and mortgage rates?

• There are several measures of inflation such as the CPI, PCE and GDP deflator. Which would you choose and why?

• You said that economic indicators showed conflicting signs. What are three or four indicators that you looked at?

• Often there is discussion on the issue of the Fed’s accountability and transparency. How much should the FOMC reveal—from C-Span to “No comment”?

• What are the advantages/disadvantages of inflation targeting? Do other central banks specify inflation targets?

• You discussed labor costs. What drives labor cost growth?

• Discuss the term structure of interest rates.

• Are you concerned about China’s economic growth? How might it affect the U.S. economy? Do any of these effects relate to the Fed’s monetary policy-making decisions?

• Given the low interest rate environment for the past several years, what is it going to take to see business investment increase?

• Are you concerned about productivity growth? What drives productivity growth?

• What are the policy objectives of the Fed?

• What causes the Phillips Curve to shift?

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National Competition

• It is often said that lower inflation is better than higher inflation. What's wrong with deflation?

• How can monetary policy stimulate business investment?

• Why is some unemployment good?

• Which is more important, employment or unemployment?

• Are you concerned about budget deficits?

• Discuss the value of the dollar (in the foreign exchange market). What are the implications for a strong dollar? What are the implications for a weak dollar?

• Since the Fed targets a short-term interest rate for monetary policy, is the Fed concerned about long-term rates? What's the connection between short-term and long-term interest rates?

• What are your own views on inflation targeting and why?

• U.S. productivity - What's been happening?

• Did recent productivity gains help or hurt employment?

• Can inflation be too low?

• Is the Fed really independent?

• What does "sustained level of consumption and investment" mean?

• Is there too much growth?

• What would happen if the inflation rate were zero?

• You've set a target for the federal funds rate. How does the Fed implement that? (Explain the process.)

• What is your forecast of inflation?

• What is your forecast of the dollar (in the foreign exchange market)?

• Could monetary policy be turned over to a computer?

• Should unemployment be zero? Can it be too low?

• What's the connection between refinancing one's house versus one's wealth? Does it increase wealth or income?

• What role did the Fed have in the 9/11 crisis?

• Doesn't a decrease in oil prices just transfer income from producers to consumers?

• What's the gain from international trade and what's the cost?

• What's the relationship between state government financing and monetary policy?

• Should we get inflation as low as possible?

• Why build in inflation?

• Doesn't ECB have an inflation target?

• There seems to be little risk of inflation now. Why?

• Is there any connection between productivity and employment?

• How can we target policy if oil prices spike? In other words, if oil prices spike, would the Fed tighten or loosen monetary policy?

• Is productivity good or not good?

• Should we drive down the dollar to help our exporters?

• How do you know if the dollar is at an appropriate level?

• To what extent is the Fed independent from the government?

• What, besides long terms for governors, fosters Fed independence?

• You mentioned recent growth in production and that growth is cyclical. Explain why you think growth is cyclical. What do you think about the underlying trend of growth in production?

• How do you see the global economy’s impact on the U. S. economy?

• Given the dual mandate of stable prices and full employment, if we see some indication of inflation backing off and below-trend growth, why isn't the Fed easing?

• You mentioned a desire for inflation targeting. What is the right target?

• You indicated that inflation should be 1-2% using the core PCE. What's your thinking on time frame, and how do we explain it to the public?

• What do you think the responsibility of the Fed should be regarding asset price changes?

• How much is the economy capable of producing? Growth has been slowing recently. How do you view productivity growth relative to where the economy is going and relative to what policy should be?

• Do you see slower productivity growth as structural?

• What implications does your view have for policy?

• What should central banks do about asset bubbles?

• What is your sense of the global economy in terms of both developed and developing economies? How does it affect us? What are policy implications?

• What do you think about inflation targeting? Is it your sense that we do have a targeted rate?

• What do you think about global factors—how they affect our economy and policy decisions?

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