Tips SIER game
Tips:
● Look at what stimulates AD, and what stimulates AS
● Keep in mind that unemployment 0% change the efficiency of the policies
● When something goes up in the GDP equation, then something should go
down
To do:
● Read manual for the extension of the game (from page 11)
● Do and review exercises for this week
● Review CA and CP concepts.
● Review slides + Review slides indicates below
● Firm bonds = government bonds: the difference is on the country of
provenance
● Supply and demand in the bonds market determine the interest rate: the
higher the IR, the cheaper the bonds, the more demand.
● Who sells bonds? In each country, bonds are issued by the local
government and by the local firms. The supply by the government equals
the size of its deficit. The supply by the firms equals the size of their
investments.
● On an efficiently working capital market the price of a bond equals 1/R,
where R is the market interest rate → Price of a consol at time t = present
value of future returns = present value of 1 curr.unit at (t+1) + 1 curr.unit at
(t+2) + .... = 1/(1+R) + 1/(1+R)2 + 1/(1+R)3 ... = 1/R.
● Open market operations policy → The local Central Bank they can decide
to sell (or buy) local government bonds, thereby lowering (or increasing)
the money supply and increasing (or decreasing) the supply of outstanding
bonds in the market, which ceteris paribus leads to a higher (lower) interest
rate. This type of policy is defined in the game in terms of a percentage of
locally outstanding government bonds.
● To make sure that during the game, the sum of total shares in a portfolio stays
100%, the actual share of bond j in the portfolio of country i is set equal to the share as
determined by (1) * 100 / sum of shares of all assets as determined by (1). As an example: if
the share of bond 2 in the portfolio of country 1 as determined by (1) equals 30%, and the
total share of all assets in that portfolio as determined by (1) equals 120%, then the actual
share of bond 2 in portfolio 1 is reduced to (100/120) * 30 = 25%.
1
Tips:
● Look at what stimulates AD, and what stimulates AS
● Keep in mind that unemployment 0% change the efficiency of the policies
● When something goes up in the GDP equation, then something should go
down
To do:
● Read manual for the extension of the game (from page 11)
● Do and review exercises for this week
● Review CA and CP concepts.
● Review slides + Review slides indicates below
● Firm bonds = government bonds: the difference is on the country of
provenance
● Supply and demand in the bonds market determine the interest rate: the
higher the IR, the cheaper the bonds, the more demand.
● Who sells bonds? In each country, bonds are issued by the local
government and by the local firms. The supply by the government equals
the size of its deficit. The supply by the firms equals the size of their
investments.
● On an efficiently working capital market the price of a bond equals 1/R,
where R is the market interest rate → Price of a consol at time t = present
value of future returns = present value of 1 curr.unit at (t+1) + 1 curr.unit at
(t+2) + .... = 1/(1+R) + 1/(1+R)2 + 1/(1+R)3 ... = 1/R.
● Open market operations policy → The local Central Bank they can decide
to sell (or buy) local government bonds, thereby lowering (or increasing)
the money supply and increasing (or decreasing) the supply of outstanding
bonds in the market, which ceteris paribus leads to a higher (lower) interest
rate. This type of policy is defined in the game in terms of a percentage of
locally outstanding government bonds.
● To make sure that during the game, the sum of total shares in a portfolio stays
100%, the actual share of bond j in the portfolio of country i is set equal to the share as
determined by (1) * 100 / sum of shares of all assets as determined by (1). As an example: if
the share of bond 2 in the portfolio of country 1 as determined by (1) equals 30%, and the
total share of all assets in that portfolio as determined by (1) equals 120%, then the actual
share of bond 2 in portfolio 1 is reduced to (100/120) * 30 = 25%.
1
