This activity is the perfect tool you need to guide your students toward a deeper comprehension of the working of banks and the process of money creation through fractional reserve banking!
This activity includes:
1) This "Banks and Money Creation" Activity includes 3 parts. It begins with a colorful graphic organizer that asks your students to trace the process through which demand deposits are turned into required reserves and new loans through fractional reserve banking. It also asks students to define fractional reserve banking and to elaborate on how banks earn profits through interest rates on outstanding loans. Next, students will have a chance to put principles into practice by working backwards to solve for changes in demand deposits, changes in required and excess reserves, and the reserve requirement for three separate banks. Finally, students will use their knowledge to calculate the change in required reserves, new loans, and the total change in the money supply produced by changes in monetary policy by using the money multiplier.
You can use this activity on its own, or in conjunction with our Money Multipliers Activity:
Money Multipliers Activity
This activity can be used in many different ways in the classroom. Students can work independently, in pairs or this activity can be used as a jigsaw in order to facilitate a class wide discussion about the topics discussed in the activity.
2) A detailed answer key to the lesson activity to save you time and help guide student comprehension.
This activity can also be found in a bundle paired with a PowerPoint, Keynote and PDF version of a fully customizable lecture found here:
If you like this activity, check out our Unit Activity Bundle that includes activities for all of the objectives in this unit.
Best of all, this activity aligns to our "Unit 4.5 - Banks and Money Creation" video lecture, which can be found here:
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