Content standards: Council for Economic Education Voluntary National Content Standards in Economics, Standard 20
Recession, Monetary Policy, and Me
50 minutes (100 minutes with optional activity)
Students will read an article discussing the current recession's impact on jobs, housing, credit, and investments; possible causes of the recession; and steps the Federal Reserve and other agencies have taken to stabilize the economy and financial markets. The article also discusses the financial difficulties that the recession has caused for many households. A handout provides questions for classroom discussion of these issues. An optional extension activity (which may be assigned as homework for later class discussion) has students consider how interest rates affect the cost of borrowing for a large-ticket item such as a car loan.
Each student will need
Ask students what they know about the current state of the economy. If they say the economy is doing poorly, question them to find out what shaped their perceptions.
Tell students they will now read an article about the current recession, or economic downturn, and how the Federal Reserve—the U.S. central bank—and other agencies are attempting to address the problem. Explain to students that the Federal Reserve, or Fed, is the institution in our country that promotes economic growth and stability by controlling the amount of money and credit in the economy.
Give each student a copy of the Extra Credit article "Recession, monetary policy affect students and their families," the accompanying glossary, and the student handout sheet with discussion questions. Ask students to read the article and consider the questions on the handout sheet.
When students have finished reading, discuss the following questions from their handout sheet:
Optional extension activity (may be assigned as homework and discussed in the next class period)
Remind students that one of the most important ways that the Federal Reserve affects their lives is by influencing interest rates, or the price borrowers pay for a loan. Ask students to choose a car or other large-ticket item that they would like to buy and find out the item's cost. Then students can use an online loan amortization schedule calculator (such as http://www.amortization-calc.com/) to determine the total amount they would pay in interest and the monthly payment and compare those outcomes under different interest rate scenarios, such as a loan at 3 percent and 5 percent.
By Sara Messina, economic and financial education specialist, Jacksonville Branch