Lesson Plan

• Describe the three main components of the Balance of Payments and their link to monetary policy.
• Explain how changes in the money supply affect the current and financial accounts.
• Analyse the transmission mechanism from a policy‑rate change to the trade‑balance outcome.
• Evaluate at least two policy options for correcting BoP imbalances.

• Projector and screen
• PowerPoint slides on BoP framework
• Handout with illustrative BoP table
• Calculator or spreadsheet for multiplier calculations
• Whiteboard and markers
• Economic data sheets (current‑account figures, interest rates)

Begin with a quick “What’s in a country’s wallet?” hook, asking students to name transactions that cross borders. Review the basic idea of the Balance of Payments and confirm they know the three accounts. State that by the end of the lesson they will be able to trace how monetary policy moves through these accounts.

1. Do‑now (5’) – short quiz on current, capital and financial account definitions.
2. Mini‑lecture (10’) – introduce the BoP identity and show how money‑supply changes affect each account.
3. Flow‑chart activity (10’) – students construct a diagram (policy rate → interest rates → capital flows → exchange rate → trade balance).
4. Worked example (15’) – calculate the impact of an expanded money multiplier on import demand and discuss the resulting CA shift.
5. Group discussion (10’) – each group analyses one policy response (exchange‑rate adjustment, monetary tightening, fiscal measure, capital controls) and presents its expected BoP effect.
6. Check for understanding (5’) – exit ticket: write one sentence describing how a rise in the policy rate influences the financial account.

Summarise the key pathways linking monetary policy to the Balance of Payments and highlight the policy levers discussed. Collect the exit tickets to gauge mastery and assign a brief homework: students must find a recent news article on a country’s BoP and explain which of the mechanisms covered today is at play.