Related Capstone Lessons

Unit 6: Lesson 34 - Money and Monetary Policy

The concept of money creation by banks is often not intuitive for students, but it is important to their understanding of the role of the Federal Reserve. In this lesson, students first discuss money, its functions, and why the money supply is important in the economy. The they take part in a short activity to learn how banks create money and affect the money supply. They then apply the concepts from the activity to an analysis of monetary policy.


  • Money Supply
  • Monetary Policy
  • Money
  • Federal Reserve
  • Fractional Reserve Banking System
  • Standard #10: Institutions
  • Standard #20: Fiscal and Monetary Policy

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