By
Ken Ripp,
social studies teacher,
Eau Claire Memorial High School in Eau Claire, WI
(DEMAND-PULL INFLATION AUCTION)
PURPOSE: To have students experience demand-pull inflation while gaining insight into three major sources of the ''too many dollars" which chase after the "too few goods and services.
OBJECTIVES
Students will:
- experience demand-pull inflation.
- be able to list two effects of inflation on decisions.
- understand where too many dollars come from.
- evaluate the impact of various sources of inflation.
MATERIALS
- "Black board" and "chalk"
- Small bowl or coffee can type container
- One set of red 3" x 3" cards, numbered 1 - 35
- One set of blue 3" x 3" cards, numbered 36 - 70
- One set of white 3" x 3" cards, numbered 71 - 105
PROCEDURES
1. Get attention by listing the historical prices of some common items and/or have students speculate on what these items will cost in the future.
2. Ask what it is called when there is a general increase in prices of most goods and services. Hopefully someone will say inflation!
3. Define inflation as too many dollars chasing after too few goods and services. Relating this back to supply and demand is a good idea. Tell students this is called demand-pull inflation.
4. Next question: Where do the too many dollars come from? This is a rhetorical question unless someone is burning to answer it.
5. Have five attractive items for sale on the board before students come into class. At this point tell them there will be an auction for each item. There will be three rounds and each item will be auctioned off each round. (I use extra credit points, sticks of gum, small wrapped candies, etc.) Make sure that the first item is less desired than the second, the second less than the third and so on.
6. Students can bid with the "dollars" they draw out of the can. They can save from round to round but they must have only one color of each denomination. (two of the same color means they are combining with someone else, which is illegal)
7. Take the red cards and toss them into the can. Tell students they are now to reach into the can and pull out their life savings. The number they pull out will be the maximum amount they can bid in round one. They can save that card to add to round 2 and/or round 3 draws if they like. You can also give change by writing a student's name on the board with the change amount after it. They can use that amount in succeeding rounds.
8. Hold the round one auction. Make sure to record the selling price under each item on the board. Emphasize, as you walk around the room with the can and the students are drawing, that they are withdrawing their life savings to spend.
9. Any left over red cards should be removed from the can. Ask students who didn't buy anything why they didn't. Most will say they didn't have enough money or they are saving for a future purchase. With that, ask how else they may legally obtain more dollars. Someone will say borrow some, use credit. You say right as you take and toss the blue cards into the can. Tell the students to reach into the can and pull out an easy credit loan. No need to repay the loan during the game and it is interest free!!
10. Hold the round two auction. Notice how prices have increased from round one. List the round two prices under the round one prices. Inflation is occurring!!
11. After the round two auction ask why some students still haven't bought anything. Need more dollars? Tell them that the government needs some new workers to do some public projects. But where does the Federal government get these extra dollars from? Raise taxes? Maybe but that's political suicide. Cut some other programs? Maybe but that's political suicide. How about creating some money by selling some bonds to the Federal Reserve Banking System? (Showing an overhead of the "Big Al" sketching would be very helpful for student understanding.) Throw the white cards in the can while saying, reach in and pull out a government pay check from the U.S. Treasury Cookie Jar.
12. Hold the round 3 auction and watch inflation sky rocket!! Stress that this is the last round so they might as well spend their dollars.
13. Debriefing can be done by looking at the rapid increase in prices from round to round. Point out how students who saved may have been hurt by the rapid inflation as they could not afford to buy anything. Are there people like this is real life? Who? What can they do to protect themselves from inflation? What future lessons does this hold for students? Now ask students where the too many dollars came from. (Spent Savings, Easy Credit Loans, Government Spending) Also ask students which of these three sources of too many dollars had the greatest impact on inflation. What does this mean for controlling inflation? This is a good lead into fiscal and monetary policy discussions.