Unpacked Content
Knowledge
Students know:
- The functions of money: medium of exchange, unit of account (measure of value), and store of value.
- The role of the Federal Reserve in the United States' economy.
- The 3 primary monetary policy tools: reserve ratio, discount rate, and open market operations to influence the federal funds rate.
- How the 3 primary monetary policy tools impact the money supply and the overall economy.
Skills
Students are able to:
- Determine the specific economic impact of changes in the reserve ratio.
- Determine the specific economic impact of changes in the discount rate.
- Determine the specific economic impact of open market operations on the federal funds rate.
- Determine the appropriate monetary policy to promote employment.
- Determine the appropriate monetary policy to combat inflation.
Understanding
Students understand that:
- Money functions to increase trade.
- Monetary policy tools are used to promote employment and economic growth.
- Monetary policy tools are used to combat inflation.
- The Federal Reserve has a role in controlling the money supply.
Vocabulary
- monetary policy
- reserve ratio (reserve requirement)
- fractional reserve banking
- discount rate
- deposit multiplier (deposit expansion
- multiplier /simple money multiplier)
- open-market operations
- federal funds rate
- easy-money policy (expansionary)
- tight-money policy (contractionary)
