Lesson Plan

• Describe how the loanable‑funds market determines the equilibrium interest rate.
• Explain the Keynesian liquidity‑preference mechanism for interest‑rate determination.
• Compare the two theories and assess their relevance for fiscal and monetary policy.

• Projector and screen
• Whiteboard and markers
• Printed handouts with supply‑demand and money‑market diagrams
• Worksheet containing comparison table and graphing tasks
• Calculator for students
• PowerPoint slides summarising key points

Begin with a quick poll: “What determines the price you pay to borrow money?” Connect students’ prior knowledge of supply‑demand to interest rates, then outline that today they will explore two competing theories and how each informs policy decisions.

1. Do‑now (5') – Short quiz on basic supply and demand concepts.
2. Mini‑lecture: Loanable‑Funds Theory (10') – Explain supply and demand determinants, show equilibrium diagram.
3. Guided practice (8') – Students plot supply/demand curves on the worksheet and identify fiscal‑policy shifts.
4. Mini‑lecture: Keynesian Liquidity‑Preference Theory (10') – Cover money‑demand motives and money‑market diagram.
5. Group activity (12') – Compare both models using a provided table; discuss short‑run vs long‑run relevance.
6. Whole‑class synthesis (5') – Teacher highlights key differences and policy implications.
7. Exit ticket (5') – One‑sentence response: “Which theory best explains a sudden rise in interest rates and why?”

Recap the main mechanisms of interest‑rate determination and emphasize how fiscal and monetary policies operate within each framework. Collect exit tickets, then assign a homework task to write a brief paragraph evaluating which theory is more appropriate for analysing a current central‑bank decision.