Imagine explaining how money moves through the economy to second graders? You must be kidding -- but they got it.
This was the final week of a five-week volunteer Junior Achievement program in my child's second-grade class. Their favorite lesson involved dividing the class into two teams, with one using an assembly line to make doughnuts, the other using unit production. When they were done, they ate real doughnuts. My husband volunteered that week; the other four weeks were mine.
This week, we covered how money flows through the economy. Having once served as a Chartered Financial Analyst review teacher in economics, I remember how hard it was to cover the banking system, and I was wary of attempting this with second-graders.
In the example, I used a quarter, which represented someone's salary. The worker used it to buy pizza; the pizza place used it to buy cheese; the cheese shop used it to clean an apron, etc. The money was used as a medium for exchange and then reused again and again and again.
When I asked what would happen if no one spent their quarters, the students responded that the economy would shut down; there would be no economic activity. They understood that the number of transactions affects economic activity.
We even discussed the velocity of money -- how fast money moves through the economy. It is calculated by dividing the Gross Domestic Product by the money supply.
I first encountered the concept as an undergraduate student at Presbyterian College in Clinton, S.C., where Dr. Carl Arnold was my money and banking professor. He was renowned for giving unbelievably hard multiple-choice tests. The answers went something like this:
C. this or that
D. this and that but only on Thursdays when the sun is shining and the rain is falling
E. all of the above
D. none of the above
He stood at the front of the classroom in his button-down shirt and pressed khaki pants and volunteered students to answer his questions. If you could not answer the question correctly, he showed no mercy.
I loved his class -- he was one of many great teachers at the school, and his explanations and insight stay with me today.