The Contest:

Each team will answer question 1. Their essays will determine the six teams who will be invited to the Capital
Markets Contest Finals on May 27 at the Los Angeles Branch of the San Francisco Fed. Each team will answer
question 2 and select one question from 3 – 5.

Essay question: During the past 10 weeks, how did economic events, announcements of economic indicators, and
government and Fed policy affect the markets? Why did each affect them the way they did? 1200 – 1500 words

The Rubric for the Essay - Maximum Score: 23 points

Score 5 3 1

(1) Used appropriate indicators, was able
to explain what they mean and their
Tells story of economic significance, compares what the
indicators during the ten indicators did to what they were
weeks. expected to do, used appropriate
number of indicators, explained
adjustments to data, the interactions
of indicators with each other, used
appropriate benchmarks.
Used appropriate Failed to identify most
indicators, not very clear important indicators, little
on meaning or understanding of the
significance, appropriate indicators, Too many or too
number of indicators, did few indicators, no benchmarks
not compare what they did
to what they were
expected to do. No
benchmarks.

(2) Explained relevant events and stories. Explained some of the Missed many of the important
Was clear on what they were. Was important events. Not events and policies.
Tells the story of major able to link event to a policy as either particularly clear.
events and policies during causative of that event or explanatory
ten weeks. of it.

(3)
Clearly explains link
between (1) and (2) above
and the movement of the
markets.
Clearly explains how the markets Explains how markets Doesn’t do much of a job
reacted. If differently than would reacted, but not much else. explaining how markets
have been expected, explains why reacted.
they reacted differently.

(4) Well written, correct grammar and
spelling, well organized, displays an
Writing, grammar, spelling, understanding of indicators,
organization, free of economic and political events of
political bias. recent past.
Grammar, spelling, and
organization are weak.
Uses inappropriate
adjectives and adverbs to
describe events and
market reactions.
Understanding of
economic and political
events of recent past is
weak.
Weak grammar, spelling, and
organization. Uses
inappropriate adjectives and
adverbs to describe events and
market reactions. Allows
political perspective to
interfere with analysis.

Mentor rating

Total
 2. Describe the current state of the economy. Compare it to this time last year. Is it better or worse?
How do you know? (All students must answer this question.)

Team _________________ Judge ____________________

Question 2: Maximum score: 12 points

3 2 1

Organization Well organized, compelling Well organized, somewhat Poor organization, argument is weak;
argument, clearly presented compelling, presentation is visual aids are not helpful in making
with appropriate and attractive clear at times, visual aids are the point.
visual aids. helpful.

Now Used appropriate data to give Too much or too little data to Failed to use appropriate data
the audience a feel for where make a compelling
the economy is. Used argument. Not much depth in
appropriate benchmarks. understanding of data.

Last year and Used appropriate economic
Comparison indicators to give the audience
a feel for where the economy
was last year and now. Makes
a definite statement to answer
the question.
Too much or too little data to Failed to use appropriate data. Did not
make a compelling make a comparison.
argument. Not much depth in
understanding of data.
Comparison was there, but
not clear.

Analysis Used macroeconomic analysis Hinted at a conceptual model No conceptual model.

to explain the connection but did not make it explicit.
between what they reported
above and reasons why the
economy is likely to be
heading in a certain direction?

Total
 3. Describe the current state of the U.S. housing market. Is it improving or not? How do you know?
What do you think analysts should be looking for over the next six months?

Question 3: Maximum Score 15 points

Current housing Market
Economic analysis
Makes a strong case for
improvement or no
improvement.
Response to questions.
Teamwork
Engage the audience?
3 2 1
Uses appropriate housing market Uses some housing Sounds like one of Jay Leno’s
indicators. Has a clear understanding of indicators. Little sidewalk interviews
the significance and interaction of evidence of
indicators. understanding of
significance.
Uses both macro and microeconomic Economic analysis is Facts but no analysis.
analysis to explain the market. Explains weak.
relationship between macroeconomy and
housing market.
Uses appropriate comparative data to Too much or too little Too much or too little data. No
bolster prediction. Uses benchmarks. Data data. No benchmarks. benchmarks. Seems
is presented in a clear and attractive way. Data seems haphazard.
Information is clear and relevant. disconnected, doesn’t
Argument is forceful. tell a cohesive story.
Quick, clear, direct. Every team member Indirect, extraneous Didn’t answer the questions.
contributes meaningfully to oral information. Every One or two team members
presentation and to answering questions. team member answered questions.
contributes, some
more meaningfully
than others.
Talk to the audience rather than reading Speaks mainly to the Read from notes
notes? Tells an engaging story and seems audience, but presents
confident in the validity of the story. facts rather than
telling a story. Not
much engagement.
 4. The domestic and European financial markets are experiencing some instability. What is
contributing to this instability? What are the implications for the value of the dollar against the
Euro?
Current European
financial markets
Economic analysis
Makes a strong case
for Dollar/Euro
movements
Response to questions.
Teamwork
Engage the audience?
Question 3: Maximum Score 15 points
3 2 1
Uses appropriate European indicators. Uses some indicators. Sounds like one of Jay
Has a clear understanding of the Little evidence of Leno’s sidewalk
significance of each indicator and understanding of interviews
relationships between indicators. Explains significance.
the reasons for the instability.
Uses macroeconomic analysis to explain Economic analysis is Facts but no analysis.
the markets. weak.
Uses appropriate comparative data to Too much or too little Too much or too little
bolster prediction. Uses benchmarks. Data data. No benchmarks. data. No benchmarks.
is presented in a clear and attractive way. Data seems Seems haphazard.
Information is clear and relevant. disconnected, doesn’t
Argument is forceful. tell a cohesive story.
Quick, clear, direct. Every team member Indirect, extraneous Didn’t answer the
contributes meaningfully to oral information. Every questions. One or two
presentation and to answering questions. team member team members
contributes, some answered questions.
more meaningfully
than others.
Talk to the audience rather than reading Speaks mainly to the Read from notes
notes? Tells an engaging story and seems audience, but presents
confident in the validity of the story. facts rather than
telling a story. Not
much engagement.
 5. Clearly, jobs are the major focus of the Administration and the Republicans going into the
November election. Trace the state of the labor market over the last year, describe and explain its
probable trend between now and November, and suggest appropriate policy to improve the situation.
Current labor market
Economic analysis
Makes a strong case
for appropriate policy.
Response to questions.
Teamwork
Engage the audience?
Question 3: Maximum Score 15 points
3 2 1
Uses appropriate labor market indicators. Uses some indicators. Sounds like one of Jay
Has a clear understanding of the Little evidence of Leno’s sidewalk
significance of each indicator and any understanding of interviews
relationships between indicators. significance.
Uses macroeconomic analysis to explain Economic analysis is Facts but no analysis.
the reason for the current state of the labor weak.
market. Not just a repeat of answers to
question 2.
Uses appropriate economic analysis to Too much or too little Too much or too little
support recommendation. Explains data. No benchmarks. data. No benchmarks.
potential shortcomings of the policy. Uses Data seems Seems haphazard.
benchmarks. Data is presented in a clear disconnected, doesn’t
and attractive way. Information is clear tell a cohesive story.
and relevant. Argument is forceful.
Quick, clear, direct. Every team member Indirect, extraneous Didn’t answer the
contributes meaningfully to oral information. Every questions. One or two
presentation and to answering questions. team member team members
contributes, some answered questions.
more meaningfully
than others.
Talk to the audience rather than reading Speaks mainly to the Read from notes
notes? Tells an engaging story and seems audience, but presents
confident in the validity of the story. facts rather than
telling a story. Not
much engagement.
Teacher Tips for success in the Capital Markets Contest

1. Use the Capital Markets Contest as a vehicle for helping students learn macroeconomics and the relationship
between the “real” economy and the financial sector (Main Street and Wall Street).
2. Introduce the macro indicators early. Get your students involved early and keep them involved. Make them
economy watchers, Fed watchers, and Obama Administration watchers. Help them see the macroeconomy in
action.
3. Split your class into teams. Assign one indicator to each team. Have teams track their indicators and report on
them to the class when they are announced. Give them a chart or spreadsheet with the major indicator
announcement dates. Make certain students responsible for certain indicators. Begin each class with student
reports of their indicator. Most days there will be no news, during certain weeks there will be substantial news,
but the reports shouldn’t take more than 5 minutes. I will keep you informed of major announcements and
major market changes.
4. Aside from these reports, The Capital Markets Contest can be a student, not teacher, activity. To the extent that
you are comfortable with it, have your students teach each other, outside of the classroom.
5. Use a mentor. It is worth 3 points on the team score and the mentor is likely to have access to information about
financial markets that you don’t have. Your mentor will have 3 points to award, based on her/his perception of
your willingness and ability to work with her/him.
6. Tips for economy watching
a. Be sure that your students clearly understand and can explain what the indicator is that they are describing.
(Use the “Indicator Game” at the beginning of your class.)
b. What happens to an indicator is not important. The relationship between what happens and what was
expected (the consensus forecast) is what moves the markets. Help your students understand that they
should compare what happened to what was expected.
c. Adjustments in certain indicators and other less widely understood indicators often have more influence
than the indicators themselves.
(rate of change of core PPI & CPI, real GDP vs. nominal GDP, final revision of real GDP growth,
changes in non-farm payroll employment vs. changes in the unemployment rate, durable goods
orders minus transportation and defense).

Seasonal adjustments are important.

d. When indicator reports are published and your students explain the changes, be sure that they explain why
the indicators changed. The Wall Street Journal is a great source for this information.
e. Look at the indicators in relation to some benchmark. (This is the largest jump since Sept 98) (“The 17,000
drop in non-farm payroll employment was the first decline since Sept, 2003)
f. Movements in the indicators affect the markets differently depending on the stage of the business cycle.
(Good employment numbers may be bad news for the financial markets when inflation is imminent, but
good news for the markets when the labor market is weak.)
g. The impact of movements in the indicators on Wall Street (the financial markets) may differ from the
impact of the movements on Main Street (households).
h. Is this change likely to influence the Fed or the Administration? If so, how?
Major mistakes

Students did not engage the audience. They should be teaching the audience and they should be good
teachers.
Students read from note cards or from the Power Points. While note cards are acceptable, students
should speak to the audience.
Students did not know the material. They were OK on the PowerPoint, but could not defend the data
and interpretation when pressed by the judges.
Students did not work as a team. During the questioning, one student answered most of the questions.
Students used too little data. They did not refer to changes in significant economic indicators.
Students used too much data; they used a “shotgun” approach instead of concentrating on fewer
numbers that were very significant. Their PowerPoints were too busy; too many charts on one page