The Dual Mandate: Jobs vs Prices

Why this matters

For nearly a decade in the 1970s the normal rule broke: unemployment and inflation were supposed to trade off, and instead both climbed together into stagflation, reaching 7 percent unemployment and 13.5 percent inflation by 1980. That failure is why the Fed carries two legal jobs instead of one.

Students expect those goals to pull the same way, then they chart 2022 and find unemployment at 3.6 percent while inflation ran at 8 percent, the exact split that forces a real trade-off. I have them write the recommendation as if briefing the Fed chair directly, since committing to hike, hold, or split beats hedging both ways on paper.

From one teacher to another

The exact moment I built this lesson for is when a student says "the Fed just prints money," and everything here is designed to make that sentence harder to say afterward. Students work through two real scatter charts, not made-up numbers, tracing the 1961-1973 Phillips curve trade-off before watching it shatter in the 1974-1980 stagflation cluster, then jumping to 2015-2026 data to find the 2022 outlier sitting at 3.6% unemployment against 8% inflation. The activity puts them in the chair of a junior FOMC analyst named Dana Reyes, who has to write Chair Powell a memo in March 2022 recommending hike, hold, or split, and I grade the memo on whether they cite real chart values and a historical model, not on which side they land on. By the end they've also sat with average inflation targeting, the 2020 framework change that gets blamed for the Fed being slow to hike, and can explain why Powell name-checked Volcker on the way up.