About This Chapter
Below is a sample breakdown of the Central Bank and the Money Supply chapter into a 5-day school week. Based on the pace of your course, you may need to adapt the lesson plan to fit your needs.
|Day||Topics||Key Terms and Concepts Covered|
|Monday||The Federal Reserve System||Monetary goals, reserve requirements, discount rates and open market operations|
|Tuesday||Open market operations and reserve ratio||Definition and examples of monetary policies and explanation of how the reserve ratio affects money supply|
|Wednesday||Discount rate, monetary supply and interest rates||Explanation of how banks borrow money from the Federal Reserve, the influence of the central bank on interest rates and an overview of buying and selling government securities|
|Thursday||Theory and velocity of money, interest rates||Quantity theory of money, which addresses prices, money and output; definition and examples of the velocity of money; real vs. nominal interest rates and how to adjust them|
|Friday||Private investments, money supply||Study of private investments and its relationship to real interest rates; relationship between hyperinflation, money supply and consumer price index|
1. What is the Federal Reserve System?
Have you ever wondered why interest rates go up and down, seemingly at random? Of course you have! Discover what the Federal Reserve is, what its goals are and how those goals are achieved in this introductory lesson explaining the central bank of the United States.
2. Reserve Requirement, Open Market Operations and the Discount Rate
This lesson outlines the three main tools used by the central bank to conduct monetary policy, including open market operations, required reserves and the discount rate.
3. Open Market Operations & the Federal Reserve: Definition & Examples
This lesson explains the most frequently used monetary policy tool of the central bank, open market operations. Using examples, you'll go inside the formula of the money multiplier and see how the Federal Reserve effectively controls the interest rate of the economy.
4. How the Reserve Ratio Affects the Money Supply
Where does our supply of money come from. Well, it's in the hands of the Federal Reserve. In this lesson, discover how the central bank can dramatically alter the supply of money in the economy by changing the reserve requirements of the banks it oversees.
5. The Discount Rate & Monetary Policy: How Banks Can Borrow Money from the Federal Reserve
Learn more about the discount rate, which is the rate that banks pay to the central bank when borrowing money. This lesson explains how changes in the discount rate affect the money supply and how the central bank can use the discount rate as part of monetary policy.
6. How the Federal Reserve Changes the Money Supply and Affects Interest Rates
Discover the connection between the money supply and economic output and how the central bank's tools lead to an increase or decrease in real GDP via expansionary and contractionary monetary policy.
7. Quantity Theory of Money: Output and Prices
This lesson explains the quantity theory of money and how to apply it, including the idea that an increase in the money supply leads to inflation in the long run.
8. The Velocity of Money: Definition and Circulation Speed
Learn about the method economists use to measure how fast money changes hands throughout the economy, referred to as the velocity of money. With the help of an imaginative story, this lesson defines the concept of velocity as well as what determines it.
9. Real vs. Nominal Interest Rates and Changes in Prices
This lesson explains the important difference between nominal and real interest rates and provides examples of how to use the Fisher equation to adjust nominal rates for inflation.
10. Private Investment and Real Interest Rates
When you borrow money, where does that money come from and why is it available? In this lesson, you'll learn about the market for loanable funds, where savers deposit money and entrepreneurs borrow money to finance private investment.
11. Hyperinflation, Money Supply and the Consumer Price Index
Is there such a thing as too much money? Maybe. What happens when inflation is excessive? This lesson explores what hyperinflation is and how it is connected with the money supply.
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Other chapters within the Macroeconomics Syllabus Resource & Lesson Plans course
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- Comparative Advantage & Specialization Lesson Plans
- Demand, Supply and Market Equilibrium Lesson Plans
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- Inflation Measurement and Adjustment Lesson Plans
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- Aggregate Demand and Supply Lesson Plans
- Macroeconomic Equilibrium Lesson Plans
- Inflation and Unemployment Lesson Plans
- Money, Banking and Financial Markets Lesson Plans
- Fiscal and Monetary Policies Lesson Plans
- Foreign Exchange and the Balance of Payments Lesson Plans
- Inflows, Outflows, and Restrictions Lesson Plans