Sunday, December 20, 2015

How to explain last week's Fed rate hike to your students

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Last Wednesday's Federal Reserve decision to raise one of its benchmark interest rates, ending a multi-year period of near zero-level rates, by one-quarter-percentage point was the top economic story of the week.  (Serious Fed-watching teachers can read the Fed's own press release announcing the change.)

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How best to explain that hike, and its impact, to your students?  Here are four resources.

1. This video clip (1:52) reports the news.

2. The Fed's action as a Rube Goldberg machine?  Rube Goldberg was a Pulitzer-Prize winning cartoonist who drew fanciful multi-step machines and inventions designed to perform often mundane tasks.  Click here for examples.  The New York Times built an actual Goldberg-inspired machine to explain what happens when the Fed raises rates.  The video showing the machine's processes lasts 1:20.  It is accompanied by a 10-step easy-to-follow explanation.

3. This video (1:31) from CNBC's On The Money show discusses how the Fed's action will impact credit card rates, auto loans, and decisions to buy/sell homes.

4. This USA Today story interviewed industry leaders to gauge the likely impact of the rate hike on housing, autos, construction, banks, and money-market mutual funds.

The Fed itself publishes a host of valuable educational materials, including a video (9:14) explaining how it operates.  Separately, Federal Reserve Banks in Philadelphia and San Francisco make other publications available for teachers.

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