Lesson Plan

• Describe the key differences between fixed (pegged) and managed‑float exchange‑rate regimes.
• Explain the principal tools a central bank uses to maintain a fixed peg, including reserve interventions and monetary‑policy adjustments.
• Analyse how interest‑rate differentials, price‑level changes and expectations influence exchange rates under a managed float.
• Apply the “Impossible Trinity” to evaluate trade‑offs between capital mobility, exchange‑rate stability and monetary‑policy independence.
• Evaluate the impact of changes in foreign‑exchange reserves on exchange‑rate stability in both regimes.

• Projector and screen
• PowerPoint slides with diagrams of fixed and managed systems
• Printed handout containing the example calculation and comparison table
• Calculator worksheets for reserve‑outflow exercise
• Whiteboard and markers
• Kahoot/quiz platform for formative check

Begin with a quick poll: “If a country’s currency suddenly fell 10 %, what would you expect the government to do?” Connect responses to prior knowledge of exchange‑rate basics and outline that today’s success criteria are to explain how fixed and managed systems operate and to evaluate policy choices.

1. Do‑now (5’) – Students answer three short questions on exchange‑rate definitions and regimes; teacher collects responses for a quick check.
2. Mini‑lecture (10’) – Overview of fixed‑peg mechanisms and the “Impossible Trinity” using slides and a simple diagram.
3. Guided calculation (10’) – Work through the reserve‑outflow example; students compute ΔR in pairs and discuss the result.
4. Interactive discussion (8’) – Present the determinants of a managed float; use a supply‑demand diagram to show the effect of a domestic interest‑rate rise.
5. Case‑study analysis (12’) – Small groups evaluate the pros/cons of defending a peg during a large current‑account deficit; groups share key arguments.
6. Formative quiz (5’) – Kahoot/MCQ round covering the five objectives.

Summarise how fixed and managed systems differ in terms of policy tools and trade‑offs. Ask students to write one “exit ticket” sentence stating which regime they think is more appropriate for a small open economy and why. Assign homework: complete the worksheet that compares real‑world examples of fixed pegs and managed floats.