Teaching the New Tools of Monetary Policy

LESSON PLANS

Classroom Activity: How Fed Policy Transmits to the Economy

In this activity, students demonstrate how changes in monetary policy move the economy toward maximum employment and price stability.

Lecture Guide: How the Federal Reserve Implements Monetary Policy

This lesson teaches how the Federal Open Market Committee (FOMC) conducts monetary policy to achieve its dual mandate of promoting price stability and maximum employment.

AP Macro Lecture Guide: How the Federal Reserve Implements Monetary Policy

This lesson provides a script and graphing practice for AP Macro teachers on how the Federal Open Market Committee (FOMC) conducts monetary policy to achieve its dual mandate. 

ONLINE RESOURCES

Online Module: The Fed's New Monetary Policy Tools

This interactive module assignment shows how the new tools the Fed uses to move the economy toward maximum employment and price stability.

Monetary Policy, The Economic Lowdown Video Series

• Part 1: The Fed and the Dual Mandate
• Part 2: Two Important Interest Rates in Monetary Policy Implementation
• Part 3: Reservation Rate and Arbitrage
• Part 4: The Fed in Action

Page One Economics: How Does the Fed Use Its Monetary Policy Tools to Influence the Economy

This reading assignment explains how the FOMC conducts monetary policy by setting the target range for the federal funds rate and how the Fed uses its policy tools to steer the federal funds rate into the FOMC’s target range.

ARTICLES FOR DEEPER UNDERSTANDING

Page One Economics: The Fed's New Monetary Policy Tools

The Federal Reserve's monetary policy implementation has shifted from a limited to ample reserve framework.  Educators need to update teaching resources to reflect the new primary tools: Interest on Reserve Balances (IORB) and the Overnight Reverse Repurchase Agreement (ON RRP) rate.

Page One Economics: Teaching the Linkage Between Banks and the Fed: R.I.P. Money Multiplier

Economics teaching should abandon the outdated "money multiplier" and instead focus on how the Federal Reserve influences banks and the economy through adjusting interest rates in an ample-reserve environment.

Article: Let's Close the Gap: Revising Teaching Materials to Reflect How the Federal Reserve Implements Monetary Policy

In an overview of major principles of economics textbooks, it is clear that there is a wide range of coverage in how the Fed conducts monetary policy today.  The article also provides recommendations on how authors can improve the next edition of textbooks to better reflect the mechanics and reasons for working in an ample reserve monetary policy model.

Article: Teaching Monetary Policy with Ample Reserves

As the Federal Reserve has shifted monetary policy in the last 20 years, this article offers a simple way to explain the key concepts, answers some commonly asked questions that both students and teachers share, and presents a classroom activity to demonstrate how the FOMC implements this policy to achieve the dual mandate of stable prices and maximum employment.