Money and Prices

Overview

Lesson 5 builds on prior learning about inflation and how changes in the general price level connect to macroeconomic conditions. Students will use economic models (quantity theory of money and a basic link between money supply and the price level) to interpret and draw simple graphs showing the relationship between money supply and the price level.

Learning intentions

• WALT analyse the relationship between money supply and the price level using inflation concepts and economic models.
• WALT interpret graphs that show how a change in money supply can affect the price level.
• WALT explain changes using economic reasoning (not just describing movement on a graph).

Success criteria

• I can interpret a money-supply-to-price-level graph and describe what happens when money supply increases.
• I can use correct graph language (axes, direction, and “ceteris paribus” ideas) to explain the relationship.
• I can draw an additional graph or sketch to model a hypothetical change in money supply.
• I can give an economic explanation linking money supply changes to the price level.

Curriculum links

• AS91222 — Analyse inflation using economic concepts and models: identifying and describing inflation concepts, explaining causes using economic models, and explaining impacts on groups in society (focused today on model-based causes and graphical interpretation).
• NZ Curriculum Refresh (Social Sciences / Economics) emphasis on using economic concepts and models to investigate relationships and make evidence-based explanations.

Lesson structure (75 minutes)

1. 0–10 min · Retrieval and warm-up. Teacher shows three quick prompts on the board: “Define inflation”, “Name one cause of rising prices”, “What does ‘all else equal’ mean?” Students complete a 3-question mini-check (quiet first, then brief pair discussion).

2. 10–20 min · Hook scenario. Teacher narrates a scenario: “The central bank increases the money supply while output is unchanged.” Students decide individually: “What might happen to the price level?” then share with a partner and volunteer one reason.

3. 20–35 min · Direct teach: quantity theory link (graphing focus). Teacher introduces a simple model idea: if money supply rises faster than real output, the price level tends to rise (using the intuition behind quantity theory of money rather than formula derivation). Teacher models two graphs on the same page:

• Graph A: Money supply on the horizontal axis, price level on the vertical axis, showing a positive relationship.
• Graph B: Price level rising after an increase in money supply. Students annotate teacher graphs using provided sentence frames (e.g., “When money supply increases, the price level tends to…”).

4. 35–55 min · Guided practice: interpret and complete graphs. Teacher gives a worked example where money supply increases and students must:

• identify the correct direction of change on the graph,
• write a 3-sentence economic explanation using “because” and “all else equal”,
• then complete a second graph for a money supply decrease. Students work in pairs; teacher circulates and uses “pause points” to check understanding.

5. 55–65 min · Independent task (scaffolded). Teacher provides one “graph set” with two blank graphs plus a short stimulus paragraph describing hypothetical changes in money supply. Students choose one graph to complete and write a short explanation (aim: interpret/draw and justify).

6. 65–73 min · Exit ticket (formative assessment). Teacher collects an exit ticket:

• Part A: interpret one mini-graph (direction + one sentence explanation).
• Part B: one-liner: “What would you assume ‘all else equal’ means in this situation?”

7. 73–75 min · Quick review of success criteria. Teacher asks: “Which graph features helped you explain the relationship?” Students respond with one term (axes, direction, relationship).

Resources

• Printed graph worksheet pack (2 interpretation graphs + 2 blank graphs)
• Graph paper or rulers (optional)
• Sentence starters and word bank cards (inflation, price level, money supply, all else equal)
• Coloured pencils or markers for distinguishing “increase/decrease”
• Visual projector slides for teacher model
• Dyslexia-friendly reading option: audio-recorded teacher script for the scenario + enlarged text handouts (1 key idea per line)

Assessment

• During guided practice: teacher checks whether students can correctly identify direction of change and use graph language.
• In independent task: teacher looks for model-based explanation (“tends to rise/fall” and “because”, not just “prices change”).
• Exit ticket: evaluates interpretation accuracy and clear use of “all else equal”.

Differentiation

• Support: provide a guided-summary sheet with “If money supply increases → price level tends to increase” highlighted, plus sentence frames and a partially completed graph for the first example.
• Support for dyslexia: offer audio version of the scenario text, enlarged-print worksheets, and allow verbal responses to graph directions before writing.
• Targeted extension within the task: give a second graph option with a less familiar order of axes (students must still interpret correctly).
• Advanced learners: require a more precise explanation that explicitly links the assumption (output/real activity unchanged) to why the price level moves.

Extension (optional)

• Students predict two outcomes for hypothetical changes:

1. money supply increases more than expected, output unchanged—describe the price level change and the likely effect on inflation rate;
2. money supply increases while output also increases—sketch the graph and explain how the price level response might differ (still using “all else equal” logic where appropriate).