Slides 6–32

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 6–8. Introduce the Federal Reserve System and identify some of its responsibilities.
6. Advance through Slides 9–10. Define monetary policy and identify it as the Fed's ability to adjust interest rates to support maximum employment and stable prices (its dual mandate).
7. Display Slide 11. Allow students a moment to read the 2 questions, then play the ~30-second video clip. Debrief the questions and encourage students to jot notes in the "Videos" section of Student Handout.
8. Proceed to Slide 12. Identify 2% annual inflation as the Fed's stated benchmark for price stability and use the "Goldilocks Range" to explain the reasoning behind this target.
9. Progress through Slides 13–14 to describe the Federal Open Market Committee (FOMC) and its role in achieving the dual mandate. Note: To prepare students for language they are most likely to encounter in everyday life (such as news reports), the lesson uses the term "the Fed" to broadly refer to the institution going forward.
10. Display Slide 15. Explain the doctor/Fed analogy — representatives of the Fed, like all economists, use a wide variety of empirical data to assess the economy.
11. Use Slides 16–17 to explain how the Fed relies on data to decide how best to "treat" the economy, observes the effects of treatment, and uses that to inform future decisions. Point out that this cycle mirrors the scientific method.
12. Proceed to Slide 18. Highlight that adjusting the federal funds rate is the Fed's main form of "treatment." Define the federal funds rate. Click to reveal the text and explain that the Fed aims to keep the rate within a given target range. Note: The Fed does not directly set the federal funds rate — it sets a target range and adjusts supply and/or demand in the federal funds market to nudge the rate into that range. This curriculum focuses on how changes filter through the economy, not on the mechanics of how the Fed influences the rate.
13. Advance to Slide 19. Use the headline and graph to point out that when the federal funds rate rises or falls, other interest rates tend to follow. Encourage students to note this relationship on Student Handout.
14. Proceed to Slide 20. Ask students to review the graph and consider the question. Note the difference between median and average values and their relative usefulness.
15. Display Slide 21. Before playing the ~1 min 43 sec video clip, tell students to consider the question on the slide as they watch. After playing, direct students to discuss the question with 1–2 classmates and note their ideas on Student Handout before debriefing as a class.
16. Proceed to Slide 22. Point out that the federal funds rate is interdependent with the rest of the economy — the Fed adjusts the rate in response to macroeconomic indicators, and adjustments prompt changes in those indicators. Note: This lesson and Lesson 3.14 use "tidy" assumptions to build a foundation for how monetary and fiscal policy are intended to work. "Messy" circumstances are introduced in Lessons 3.15 and 3.16.
17. Display Slide 23. Remind students the Fed relies on data to make monetary policy decisions. Guide students through analyzing the data to determine the most likely action (related to the federal funds rate). (See notes section of Instruction Slides for additional support.) Note: For simplicity, data has been artificially constrained — in reality, the Fed relies on significantly more data across a longer time frame and more indicators.
18. Advance to Slide 24. Explain the chain of events most likely to result from the change in the federal funds rate, clicking to reveal each step. Instruct students to record the correct arrows in the "Predicting Monetary Policy and Tracing the Most Likely Chain of Events" section of Student Handout.
19. Proceed to Slide 25. Place students into groups of 3 (4 if needed). Tell students to analyze the data and determine whether the Fed will likely raise or lower the federal funds rate. Poll the class and debrief as needed.
20. Display Slide 26. Instruct groups to fill in the correct change to the federal funds rate on Student Handout and complete the chain of events. Call on a volunteer to explain their group's chain of events. Click to reveal the correct responses as answers are given. Clarify as needed.
21. Advance to Slide 27. Tell students to analyze the data individually and use that information to fill in the chain of events on Student Handout. Note: It can be helpful to acknowledge this scenario is more challenging than the previous ones.
22. Proceed to Slide 28. After approximately 2 minutes, allow students to confer with their group and make changes. Call on a volunteer to explain their chain of events. Reveal and discuss both possible rate changes (increase or decrease) and their subsequent chains of events, clicking to reveal the correct responses as needed.
23. Progress through Slides 29–30. Tell students to discuss the question on Slide 30 with their group. After approximately 30 seconds, click to reveal the correct response and debrief.
24. Proceed to Slide 31. Ask students to consider how their initial responses to the activator have changed or deepened throughout the lesson.
25. Advance to Slide 32. Remind students of the Fed's dual mandate and instruct students to discuss the question with their group. Debrief as a class. (See notes section for suggested responses.)