Slides 5–39

4. Distribute 1 copy of Student Handout to each student. Encourage students to jot down notes, examples, and details throughout the lesson.
5. Progress through Slides 5–7. Identify banks' role as financial intermediaries. Use the activator examples to illustrate who benefits from this service and how banks facilitate connections between borrowers and savers. Explain that the financial market allows people to help one another reach their goals without meeting or communicating.
6. Display Slide 8. Define interest rate.
7. Advance through Slides 9–11 and describe how banks act as financial intermediaries.
8. Proceed to Slide 12. Instruct students to consider the 2 questions on the slide. Debrief as a class.
9. Display Slide 13. Summarize the key functions of banks as financial intermediaries.
10. Proceed to Slide 14 and instruct students to discuss the 2 questions with a peer. After approximately 30 seconds, debrief as a class.
11. Progress through Slides 15–16. Reinforce that interest rates impact both borrowers and lenders/savers. Click to reveal the question on Slide 16 and ask students to consider it. The hint assumes students participated in the coffee market simulation from Lesson 2.1 — consider changing the hint if needed. After approximately 15 seconds, ask 1–2 volunteers to share. Click to reveal the correct response. Encourage students to add notes to the "Determining Interest Rates" section of Student Handout.
12. Display Slide 17. Instruct students to review the market models from Unit 2 and discuss the question with a peer. After 5 seconds, click to reveal the correct response. Point out that the y-axis on market models is always a price.
13. Proceed to Slide 18. Repeat for the x-axis question. Point out that the x-axis on market models is always quantity.
14. Advance to Slide 19. Introduce the market for loanable funds model and emphasize its similarities to the product market model. Note: Students are not expected to draw the market for loanable funds model or shifts in the market — the primary purpose is to give students a sense of where interest rates come from.
15. Display Slide 20. Identify the axes on the market for loanable funds model and explain what each represents.
16. Proceed to Slide 21. Ask students to predict what the supply curve, demand curve, and equilibrium represent in the market for loanable funds. Direct students to share predictions with a classmate.
17. Progress through Slides 22–26 to reveal the correct responses. Connect the borrowers and savers from the activator to the supply and demand curves on the model. Note: Acknowledge that, like the product market model, the market for loanable funds is a helpful but imperfect representation of the real world. In Lesson 3.12, students learn how the Federal Reserve System's actions influence interest rates.
18. Display Slide 27. Tell students to discuss the question with a peer. Click to reveal the correct response and debrief.
19. Proceed to Slide 28. Place students into pairs (groups of 3 if needed) and explain they will work together to determine how borrowers and savers react to changes in interest rates.
20. Display Slide 29. Tell students to read the instructions and complete the relevant portion of Student Handout. Allow approximately 5 minutes. Note: For pairs who struggle, remind students that the interest rate is a price — demanders look for low prices and suppliers look for high prices.
21. Progress through Slides 30–31. Click to reveal the correct responses and explain each person's reaction to the change in interest rate. (See notes section of Instruction Slides for suggested responses.)
22. Proceed to Slide 32. Allow approximately 1 minute for students to jot notes below each scenario and complete the "Sum It Up" section on Student Handout.
23. Progress through Slides 33–34. Ask students to discuss each question with a peer. Pause between slides to debrief as a class.
24. Progress through Slides 35–36. Note that not all purchasing is sensitive to changes in interest rates. Ask students to consider the question on Slide 36 and record responses in the "Effects of Interest Rates" section of Student Handout.
25. Proceed to Slide 37 to reveal the correct answers. Encourage students to correct their responses as needed.
26. Display Slide 38. Tell students they will explore what kinds of decisions in the household and business sectors are affected by a change in interest rates and how those decisions affect the broader economy in the short run. Allow approximately 6 minutes to complete the "Practice" section of Student Handout. Circulate to answer questions. Reference KEY Practice as needed. Note: If time is a concern, question 3 can be assigned as homework.
27. Proceed to Slide 39. Summarize how a change in interest rates affects saving and spending. Debrief individual practice questions as a class as needed.