Do you need a fantastic activity that provides your students with plenty of practice with the money multiplier effect? This activity is the perfect tool you need to guide your students toward a deeper comprehension of how monetary policy and the multiplier effect affect money creation!
This activity includes:
1) This "Money Multipliers" Activity includes 5 parts. First, your students will be asked to calculate the potential change in demand deposits from an initial deposit using the money multiplier for 3 separate countries. Next, your students will be asked to calculate the potential change in required reserves from an initial deposit using the money multiplier for 3 separate countries. Then your students will be asked to calculate the potential change in new loans from an initial deposit using the money multiplier for 3 separate countries. Finally, your students will be asked to calculate and compare the change in demand deposits, required reserves, new loans.and ultimately the money supply when money originates from the Fed and when it originates from a M1, M2, or M3 deposit. Students will discover the difference between the two scenarios and how an injection of money by the Federal Reserve makes money creation more powerful than when it comes from the Fed. The activity then concludes with TWO short-answer free response questions. These FRQs are written in a format similar to the CollegeBoard, and will ask students to critically think about what they've learned.
You can use this activity on its own, or in conjunction with our Banks and Money Creation Activity:
Banks and Money Creation 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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