New Developments in Economic Education
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New Developments in Economic Education

Edited by Franklin G. Mixon and Richard J. Cebula

This innovative book offers targeted strategies for effectively and efficiently teaching economics at both undergraduate and postgraduate levels. It provides professors and other teachers of economics various techniques to engage and retain the interest of students, and challenges them to apply both knowledge and methodological tools to a range of economic problems.
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Chapter 2: A classroom federal funds market experiment

Denise Hazlett


In a classroom experiment, students represent banks that borrow or lend in the federal funds market. As students negotiate loans with each other, they see how Federal Reserve open market operations affect the interest rates on their loans. Participating in the experiment vividly demonstrates why the removal of banking reserves via open market sales raises the federal funds rate and why the addition of banking reserves via open market purchases lowers the federal funds rate. The experiment uses a non-computerized double oral auction format and takes about 45 minutes to run. In the follow-up assignment, students analyse the data generated by the class. The experiment can be used in a money and banking or macroeconomics course, with 9-100 students.

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