General Information

Title: Banking and Interest

Subject Area: Social Studies/Economics

SOL 7.6 - Virginia Standards of Learning

The Students will explain the structure and operation of the United States economy as compared with other economies, with emphasis on:

• the basic concepts of free market, as described by Adam Smith, and of communism, as described by Karl Marx;
• the concepts of supply and demand, scarcity, choices, trade-offs, private ownership, incentives, consumer sovereignty, markets, and competition;
• private and public financial institutions
• the economic impact of consumption, saving and investment, and borrowing by individuals, firms and governments; and
• the differences between free market, centrally planned, and mixed economies.

Grade Level: 8

Lesson Topic: Banking and Interest

Descriptive Overview: Students will calculate interest given the time frame and interest rate. Students will weigh the advantages and disadvantages of higher and lower interest rates. Students will hypothesize what effect these rates will have on the economy.

Advantages of Medium:

• Students will receive automatic feedback on practice items.
• Students will be able to calculate interest easily by manipulating the variable provided.

Lesson Specifics

Lesson Objectives/Goals: The student will:

• Explain the government's role in the banking industry
• Define and calculate interest
• Determine the effect of interest and loans on the money supply

Assumed Skills or Prerequisite Skills:

• Students must be familiar with the unit vocabulary
• Students should be able to find the percent of a number, and use basic math skills

Learning Environment:

• one computer - teachers must download a worksheet for this lesson. Also a transparency of notes should be made to use on an overhead projector.
• computer lab setting- no materials will be needed

Instructional Set

Present this scenario to the class:
You want to buy a car. You ask to have payments calculated for both 4- and 5-year loans. When you discover the total price for the car, there is a difference between the 4- and 5-year totals. Why?

Gaining Attention: Not applicable

Orienting the Lesson: Not applicable

Stimulating Recall of Prerequisites: Not applicable

Key Questions:

1. What is interest?
2. How does the government affect the interest rate?
3. Do loans increase or decrease the money supply?

Teaching Strategies

1. Review services of various financial institutions. Concentrate the discussion on loans.
2. Lead to a discussion that enables student to discover that banks and other companies make money through charging interest.
3. Define interest rate and discuss the formula for calculating interest.
4. Describe the role of the Federal Reserve in forming monetary policy.
5. For a guided practice activity, complete 1-5 simple interest problems.
6. Ask students to make observations about the different interest rates that were used in the activity.
7. Review problems by allowing students to check their work with calculators.
8. As an independent work activity, students should complete 1-8 interest problems.
9. Have students share answers in pairs.
10. Lead a class discussion on the effect of the interest rate and the amount of money is in our money supply. Ask: How does the government regulate the money supply?
11. Students should be encourage to ask their parents about interest rates that they have on mortgages, credit cards, car loans, etc.

Terminology/Vocabulary:

Interest Rate

Practice: Calculating interest automatic problems

Assessment: Worksheet - "How To Calculate Interest"

Enhancements

• Students could compare the effects of simple and compound interest. Students could shop around for the best interest rates on credit cards, loans, etc.
• Students can compare the interest rates of other countries with the rate of the United States.

  
  Australia
  Canada

Extensions

Not applicable