Lesson Note on Money: Meaning, Demand and Supply Determinants for SS 2

Class: Senior Secondary School 2 (SS2 / SSS2)
Term: 3rd Term
Week: 9
Age: 16 years
Duration: 45 minutes
Subject: Economics
Curriculum Theme: Macroeconomics
Previous Lesson: Capital Market: Functions, Stock Exchange and Market Types.
Topic: MONEY: DEMAND FOR AND SUPPLY OF MONEY
Subject Matter: Meaning of money (anything generally accepted as medium of exchange), determinants of supply of money, determinants of demand for money, value of money, price level

Specific Objectives

By the end of the lesson, pupils should be able to:

Cognitive Domain:

• Define money.
• State the motives for holding money.
• List the determinants of demand for money.
• Identify the determinants of supply of money.
• Explain the relationship between the value of money and the price level.

Affective Domain:

• Appreciate the importance of money in an economy.
• Value the stability of the value of money.

Psychomotor Domain:

• Differentiate between commodity money and fiat money with examples.
• Illustrate various forms of money.

Social Domain:

• Discuss the impact of money on economic activities.

Reference Materials

The following resources were used in planning this lesson:

• Senior Secondary Schools Education Curriculum
• State Unified Scheme of Work
• Alayande, S. (2018). Simplified Economics for Senior Secondary Schools. Comprehensive Publishing Ltd.

Instructional Materials

The teacher will teach this lesson with the aid of:

• Coins
• Cheques
• Paper money
• Specimens of items that could serve as commodity money (e.g., cowries, salt)

Rationale for the Lesson

This lesson helps pupils understand the fundamental concept of money, its functions, and what influences its availability and desire to be held. It enables pupils to grasp how money impacts their daily economic transactions and the overall economy.

Prerequisite/Previous Knowledge

Pupils have a basic understanding of trade, exchange, and the concept of needs and wants in an economy.

Lesson Content/Board Summary

MONEY: DEMAND FOR AND SUPPLY OF MONEY

Meaning of Money

Money is anything that is generally accepted as a medium of exchange, a measure of value, a store of value, and a standard for deferred payments.

The following are the functions/characteristics of money:

• Medium of Exchange: It facilitates the exchange of goods and services without the need for barter.
• Unit of Account: It provides a common measure of the value of goods and services.
• Store of Value: It allows wealth to be held over time.
• Standard of Deferred Payment: It allows debts and future payments to be expressed in monetary terms.

Demand for Money (Motives for Holding Money)

The demand for money refers to the desire of individuals and firms to hold money balances rather than investing them in assets.

The following are the motives for holding money:

• Transactionary Motive: Holding money to meet day-to-day spending needs and regular transactions.
• Precautionary Motive: Holding money to cover unexpected expenses or emergencies.
• Speculative Motive: Holding money to take advantage of future changes in interest rates or asset prices, hoping to make a profit.

Determinants of Demand for Money

The following are the factors that determine the demand for money:

• Income: Higher income generally leads to a higher demand for money for transactions.
• Price Level: An increase in the general price level means more money is needed for the same amount of goods and services.
• Interest Rates: Higher interest rates on other assets make holding money less attractive, reducing demand.
• Availability of Credit: Easy access to credit can reduce the need to hold large cash balances.
• Wealth: The overall wealth of individuals and firms can influence their demand for money.
• Expectations: Expectations about future prices or interest rates can influence current demand for money.

Determinants of Supply of Money

The supply of money refers to the total amount of money circulating in an economy at a given time.

The following are the factors that determine the supply of money:

• Central Bank Policies: The central bank (e.g., CBN) controls the money supply through various tools such as:
  • Open Market Operations: Buying or selling government securities.
  • Reserve Requirements: The fraction of deposits banks must hold in reserve.
  • Discount Rate: The interest rate at which banks can borrow from the central bank.
• Commercial Bank Activities: Commercial banks create money through their lending activities (credit creation).
• Public’s Desire to Hold Cash: If the public prefers to hold more cash, banks have fewer reserves to lend, affecting money supply.

Value of Money and Price Level

Value of Money: This refers to the purchasing power of money, i.e., the quantity of goods and services that a unit of money can buy.

Price Level: This is the average level of prices of all goods and services in an economy.

There is an inverse relationship between the value of money and the price level. When the price level rises (inflation), the value of money falls (it can buy less), and when the price level falls (deflation), the value of money rises (it can buy more).

Types of Money

The following are common types of money:

• Commodity Money: Money whose value comes from a commodity of which it is made. It has intrinsic value. Examples include gold, silver, salt, cowries, and tobacco.
• Fiat Money: Money that has value only because a government has declared it to be legal tender. It does not have intrinsic value, but its value is backed by government decree and public trust. Examples include paper currency (naira notes) and coins.

Teaching Methods/Instructional Techniques

Discussion, Lecture, Demonstration, Question and Answer, Visual Aids

Instructional Procedures

Step 1: Introduction

Time: 5 minutes
Teaching Skill: Set Induction
Teacher’s Activity: The teacher asks pupils how they acquire goods and services in the market and what challenges would arise if there was no generally accepted medium of exchange.
Pupils’ Activity: Pupils respond by mentioning buying with money and discussing the difficulties of a barter system.
Learning Point: Pupils recall previous knowledge about exchange and are introduced to the concept of money.

Step 2: Meaning and Functions of Money

Time: 8 minutes
Teaching Skill: Explanation/Definition
Teacher’s Activity: The teacher defines money and explains its key functions (medium of exchange, unit of account, store of value, standard of deferred payment), writing them on the board.
Pupils’ Activity: Pupils listen attentively, define money in their own words, and copy the functions from the board.
Learning Point: Pupils understand the definition and primary roles of money in an economy.

Step 3: Demand for Money (Motives)

Time: 8 minutes
Teaching Skill: Explanation/Questioning
Teacher’s Activity: The teacher explains the three main motives for holding money: transactionary, precautionary, and speculative motives, providing real-life examples for each.
Pupils’ Activity: Pupils listen, ask questions for clarification, and state the motives for holding money.
Learning Point: Pupils identify and understand why individuals and firms choose to hold money.

Step 4: Determinants of Demand and Supply of Money

Time: 8 minutes
Teaching Skill: Elaboration/Listing
Teacher’s Activity: The teacher explains the various factors that influence the demand for and supply of money, drawing from the board summary.
Pupils’ Activity: Pupils listen and list the determinants for both demand and supply of money.
Learning Point: Pupils identify the factors that affect the quantity of money desired and available in the economy.

Step 5: Value of Money and Price Level

Time: 6 minutes
Teaching Skill: Conceptual Explanation
Teacher’s Activity: The teacher explains the concepts of the value of money and the general price level, highlighting their inverse relationship.
Pupils’ Activity: Pupils listen and grasp the relationship between how much money can buy and the average cost of goods.
Learning Point: Pupils understand the purchasing power of money and its link to inflation/deflation.

Step 6: Types of Money

Time: 5 minutes
Teaching Skill: Demonstration/Differentiation
Teacher’s Activity: The teacher uses the instructional materials (coins, paper money, cheques, commodity money examples) to illustrate and differentiate between commodity money and fiat money.
Pupils’ Activity: Pupils observe the examples and differentiate between commodity and fiat money.
Learning Point: Pupils recognize and distinguish between different forms of money.

Step 7: Evaluation/Review

Time: 5 minutes
Teaching Skill: Questioning/Assessment
Teacher’s Activity: The teacher evaluates the learning by asking the following questions:

1. Define money.
2. State any three functions of money.
3. Mention two motives for holding money.
4. Differentiate between commodity money and fiat money, giving one example for each.

Pupils’ Activity: Pupils answer orally and in writing.

Learning Point: Pupils demonstrate understanding of the lesson.

Step 8: Conclusion

Time: 1 minute
Teaching Skill: Summarization
Teacher’s Activity: The teacher summarizes the key points of the lesson, reiterating the importance of money in economic transactions.
Pupils’ Activity: Pupils listen and ask any final questions.
Learning Point: Pupils consolidate their understanding of money and its role.

Lesson Keywords

• Money – Anything generally accepted as a medium of exchange.
• Demand for Money – The desire to hold wealth in the form of money.
• Supply of Money – The total amount of money circulating in an economy.
• Value of Money – The purchasing power of money.
• Price Level – The average level of prices of goods and services.
• Commodity Money – Money with intrinsic value.
• Fiat Money – Money declared legal tender by government.

Differentiation

For pupils who grasp concepts quickly, the teacher can challenge them to analyze the impact of changes in money supply on inflation. For pupils who need more support, the teacher will provide simplified definitions and additional examples.

Note for teachers using this lesson plan

Ensure that pupils understand the practical implications of money in their daily lives. Encourage discussions on current economic events related to money and prices. Use visual aids effectively to reinforce understanding, especially when explaining different types of money.