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CNN Student News Learning Activity: Understanding the Fed

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  • Learn about the Federal Reserve System
  • Understand how monetary policy impacts the economy
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(CNN Student News) -- Students will learn about the Federal Reserve System and how monetary policy impacts the economy.


Ask students to list the characteristics of the economic system found in the U.S. List these characteristics on the board. Point out to students that, while the U.S. economy is often categorized as a free market system, the government plays a role in it by determining monetary policy.

Have students consider some reasons why a free market system would allow for government action. Then, direct students to the Internet and other resources to learn more about the Federal Reserve (the Fed) and its role in stabilizing and promoting the growth of the U.S. economy. Have students work in groups to find answers to the following questions:

1. What is the Federal Reserve System?

2. When was it created? What economic conditions and issues prompted its creation?

3. What is the role of the Fed in the U.S. economy today?

4. What are the Fed's tools of monetary policy?

5. How does the Fed use each of these tools to influence the supply of credit and money?

Challenge groups to describe scenarios in which the Fed uses its tools of monetary policy to influence the economy, and identify the possible effects of that action on consumers and businesses. Have groups present their scenarios to the class.

Correlated Standards


Standard 20 : Monetary and Fiscal Policy

Students will understand that:

* Federal government budgetary policy and the Federal Reserve System's monetary policy influence the overall levels of employment, output, and prices.

Students will be able to use this knowledge to:

* Anticipate the impact of federal government and Federal Reserve System macroeconomic policy decisions on themselves and others.

The Economics America National Standards ( are published by the National Council on Economic Education (


Federal Reserve, monetary policy, free market economy, federal funds rate, discount rate, interest rate, money supply E-mail to a friend E-mail to a friend

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