- Peer Review: “The Inflation Rate: A Case Study”
The Inflation Rate: A Case Study
- Jan 14, 2002 by Business
- This module is part of the Econ Ed Link website sponsored by the National Council on Economic Education, a non-profit organization to increase economic literacy among Americans. The module is designed to introduce the concept of inflation using up-to-date current as well as historical inflation data. The student version starts with the most recent inflation data, looks at trends in the data and goes on to discuss the definition, costs and causes of inflation. It then incorporates quotes from the latest Federal Reserve?s Beige Book and most recent Open Market Committee meeting announcement as well as discusses the Fed?s action of the past year. The case study ends with five questions that students are to answer, presumably from material presented in the case study.
A teacher?s version has learning objectives and additional material, as well as suggested additional exercises, especially in the calculation of price indexes.
- Type of Material:
- This material is correctly identified in the MERLOT database as ?Drill and Practice?. Basic material is presented on the concept of inflation and illustrated with current inflation and economic data. The students should then demonstrate their understanding of inflation by reflecting on the Fed?s current and suggested future economic policy.
- Technical Requirements:
- The technical requirements are minimal?any web browser (IE or Netscape, Version 3.x or higher) should do the job. The three graphs in GIF format are relatively small and quick to load in both the teacher and student versions.
- Identify Major Learning Goals:
- The stated goal of the module is to increase the learner?s understanding of inflation. An especially novel approach is the use of a discussion of up-to-date inflation data. This enables the student to start with information commonly found in news releases by the media to motivate a more sophisticated understanding of inflation. However, there is some cause for confusion, as the questions at the end of the case study, as well as much of the later material, suggest that the overall objective is to illuminate the Fed?s balancing act between stimulating production without fueling inflation.
- Target Student Population:
- The module identifies high school students in grades 9-12 as the target student population. However, the module could also be used for college students in the principles of macroeconomics course.
- Prerequisite Knowledge or Skills:
- In order to do calculations of price indexes as suggested in the teacher?s version of the module, a student would need math skills at the basic algebra level.
In order to answer some of the five questions at the end of the case study, it seems that students would have to have a basic understanding of the structure, function, goals, and dilemmas of the Federal Reserve and U.S. monetary policy.
- The incorporation of current inflation data and graphical illustration of historical inflation data, as well as quotes from the Fed?s Beige Book and FOMC announcements is excellent. Links to related sites are very appropriate and useful. Using recent inflation information releases from the Bureau of Labor Statistics and the Federal Reserve is an excellent example of integrating current information into a learning assignment.
- There is concern that there is an adequate amount of material on the site to answer the questions posed to the student. The information in the first part on inflation is excellent but insufficient to allow students to answer questions about recent and projected activities of the Federal Reserve. As there is another module on the Federal Reserve, perhaps the student is expected to refer to it. This should be stated explicitly, if so.
The small amount of material on ?Other Measures of Inflation? should probably be expanded or eliminated.
It appears that a ?new? case study was written every month only for the end of spring and fall semesters. Since inflation statistics are updated monthly and summer classes may wish to make use of this site, monthly updates should be provided all year long preferably. (Of course, the authors seem to be providing monthly case studies for the NCEE on five other economic variables besides inflation. Kudos!)
Potential Effectiveness as a Teaching Tool
- This module is clearly designed to be used by classroom instructors. The information is well-organized, presented in a straight-forward manner, and accurate. Both teacher and student versions are provided, and printable versions of both were also made available. Moreover, the instructor?s version contains much additional information and suggestions, as well as suggested answers to the case study questions. The information on inflation progresses effectively from the latest data to trends, explanations, and ramifications.
- The level of prerequisite economics understanding is rather undefined, and perhaps inconsistent. To demonstrate inflation, instructors could use the first part very effectively. To analyze recent actions of the Federal Reserve, the instructor would have to provide more information about the Federal Reserve and monetary policy. And while initially it appears no prerequisite knowledge is required, Student Question 3-5 asks about the policy options for the Federal Reserve, which requires an understanding of the relationship between monetary policy and inflation. Similarly, among the ?Other Questions for Students?, Question 5 requires the computation of a price index, which is not discussed on the web page. This also clearly requires additional instruction from outside of the web site. I would recommend tailoring more general questions about inflation and its consequences to the details of the announcements. (For example, is inflation changing faster or slower than was expected? How would this affect fixed-rate borrowers, lenders, etc.)
Ease of Use for Both Students and Faculty
- A key feature of this website is functionality. It has minimal graphics and no multimedia features (audio, video, animation) to tie up bandwidth. Graphics are important and effectively integrating without being burdensome to the function of the browser. And, although there is an inherent risk in referring to Internet resources that are beyond the control of the author, all of the active links were unbroken.
- A link to the Whitehouse Economic Statistics Briefing Room?s prices web page (http://www.whitehouse.gov/fsbr/prices.html) or to the Bureau of Labor Statistics? web page (http://www.bls.gov/) should be considered. The Whitehouse site has the advantage of displaying current releases of other inflation indicators, including the two mentioned specifically in the case study--the PPI and the GDP Price Index.