Students learn about the purpose of the reserve requirement, how money is "created" in the economy through fractional reserves, and how the Federal Reserve uses the reserve requirement and loans to correct economic instability.

Concepts

banking, deflation, inflation

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Additional Tags

central banking system, council for economic education, econedlink, supply, tools of the federal reserve, federal reserve system

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Classroom Considerations

• Knovation Readability Score: 5 (1 low difficulty, 5 high difficulty)