Pop quiz: What’s the economic principle that explains how a rise in inflation leads to a rise in the nominal interest rate?
If you’re stumped, don’t feel too bad.
So was Eric Schmidt, a Little Falls High School senior whose team on Monday took home yet another victory in the Minnesota state Econ Challenge.
The city of about 8,300 usually rolls through the state competition and has taken home two straight national titles. If Schmidt and his three teammates get through the national semifinals and make it to nationals again, it will be Schmidt’s first trip on an airplane.
“Little Falls has been to New York before, so we know we can do it,” said Schmidt, the son of a welder and bank teller who led all competitors in his division through a morning of test-taking at the Federal Reserve Bank of Minneapolis.
Schmidt said he was a little nervous, but “after you get a few points, you get on a roll.” He plans to study computer engineering next year at North Dakota State University.
Two schools in each of three divisions did well enough through the morning to make it to the quiz bowl, and one in each were victorious — including Barnesville in the small-school division, Little Falls in the midlevel and Mounds View among large schools with Advanced Placement programs.
“It’s always called the dismal science, and I tell them it’s my job to make it the delightful science,” said Tom Stockard, the government and economics teacher who has masterminded Little Falls’ recent dominance.
He sends e-mails with study material to students in the middle of the night. He’s taught at the school for 20 years. At the beginning of each economics section, he tries to explain that economics is not the study of money, but instead the study of scarcity and decisions.
“We really kind of commit most of our spare time to econ — like six hours a day,” said Brian McNamara, a Little Falls senior who plans to study chemistry at Macalester College and then go to medical school.
Some of the questions in the quiz bowl, where students have to hit buzzers and then answer the question within 15 seconds, are straightforward. How many Federal Reserve banks are there? Answer: 12.
Others are more complex. A market where there is only one buyer and many sellers is called what? Answer: A monopsony. It’s sort of the opposite of a monopoly.
As for the principle that explains the relationship between inflation and the nominal interest rate, it’s called the Fisher Effect.
The challenge is sponsored by the Federal Reserve, the Minnesota Council on Economic Education, and Mosaic Co. Next up for Little Falls and Mounds View is a written test on April 16, the national semifinals. The top four teams in each division will be invited to the national finals on May 19 in New York.