Interest Rates: Real vs Nominal Practice

Are interest rates a good or bad thing? Explain to your young economists why the answer depends on such factors as who is buying and lending and what is the inflationary rate, and how this all ties into banking practices and general monetary policy. 

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CCSS: Adaptable
Instructional Ideas

  • Use the sample problems in your own classroom as part of guided practice, or offer the video on your class website as a supplemental study aid for your students
Classroom Considerations

  • Designed for an advanced placement macroeconomics class, students should have a very strong foundational understanding of interest rates in general, as well as the responsibility of the Federal Reserve System in shifting money supply, prior to beginning this video

  • Instructor offers sample problems for calculating real interest rate given inflation and nominal interest rate
  • Explains concepts by illustrating on a whiteboard

  • Moves through content at a very fast pace