Unit 4 of 6

Financial Sector

In the previous unit, students explored the effects of fiscal policy. In this unit, students will evaluate the macroeconomic effects of monetary policy. Before doing so, though, they should first have an understanding of how the financial sector works and be able to describe how monetary policy is implemented and transmitted through the banking system. This understanding begins with an introduction to financial assets, including money, and the way in which fractional reserve banking allows for the expansion of the money supply. Students will then build on their understanding of the financial sector by learning how to model the money market, the reserve market, and the loanable funds market.