Focus on Finance: Inflation, Interest Rates, & Arkansans
How do rising and falling interest rates affect people living and working in Arkansas? Recently, Dr. Jeremy Horpedahl, UCA Economics Professor and Director of the Arkansas Center for Research in Economics, wrote a short explainer on the topic of interest rates for the Winter 2022 Issue of Arkansas Flavor by Arkansas Times. He explains how inflation impacts individuals in the U.S. and Arkansans specifically, and discusses actions taken by government to attempt to stabilize the U.S. economy. He closes by sharing ways you can protect the value of the dollars you earn.
Connections to Arkansas Learning Standards:
Inflation and interest rates are key topics in many Arkansas content areas. Below are some of the connections you can make:
Economics:
NE.6.E.1 Compare and contrast the roles and functions of financial institutions in the United States including banking practices and regulation of savings and investments
NE.6.E.2 Examine monetary policy tools used by the Federal Reserve System
Personal Finance:
PF.7.SI.2 Examine how consumers are affected by raising and lowering interest rates
Civics:
PRL.7.C.1 Evaluate interaction among federal, state, and local governments when carrying out public policy
PRL.7.C.2 Identify intended and unintended consequences of public policies
U.S. Government:
SFG.6.USG.1 Analyze the impact of the federal government’s fiscal policy on the economy
SFG.6.USG.2 Evaluate the roles various government agencies play in maintaining the nation’s economic health
Lesson Plan:
You can also use this resource to guide your student through a close-reading activity and classroom discussion. To begin, allow students to pair up to read and Mark-Up-The-Text of the article. This task requires students to read through the piece carefully while looking for main ideas and key pieces of information in the text. After students have completed their close-readings, use the following questions to guide conversation:
1.What is inflation? How does inflation impact Americans? Arkansans?
Students will define inflation as a rise in prices and discuss how that impacts their decision making. When prices go up, what kinds of choices do they and their families make? Students may describe consuming less when prices go up or looking for cheaper alternatives for the goods and services they normally buy.
2.What actions have been taken at the federal level? How do those actions impact individuals & communities?
Students might highlight Coronavirus Aid, Relief, and Economic Security Act (CARES Act) that provided payments sent out to households during the pandemic. For an example, if someone was temporarily unemployed during the pandemic, those payments could be used to keep them afloat until they found new work. Students might also describe more recent decision to increase the interest rates charged to banks by the Federal Reserve and how this impacts interest rates for everyone.
3.How does inflation influence the individual choices we make on a daily basis?
Encourage students to either share or write down some things they might personally do to protect their dollars. If a student is employed, they might start saving additional portions of their earnings for emergencies. Others might share alternatives to things they normally spend money on, for example, making pizza at watching TV at home with their friends instead of going out to eat and see a movie.
To expand on your discussions, you can also ask students to investigate headlines in the media to find additional articles on the topic of inflation. Encourage students to evaluate the sources they find and share any new information they discover. To close, ask students to share in their own words how rising and falling interest rates impact themselves, their families, and their communities.
Additional Resources:
Looking for more content and activities for discussing interest rates in the classroom? Check out ACRE’s Mastering Interest Rates curriculum. Developed by UCA Professor of Finance Dr. Mike Casey, these lessons and activities provided differentiated instructional methods for discussing interest rates with Arkansas students.
