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Currency

and the

Fed

Lesson Plan

L e s s o n

D e s c r i p t i o n

In this lesson, students consider who is pictured on the different denominations of
U.S. currency and why. They participate in an activity to identify functions of basic,
everyday items and then identify and explain the functions of another basic, everyday
item—money. Students learn some basic facts about money as well as some basics
about the Federal Reserve System. In addition, they describe the Federal Reserve’s role
in the distribution of money by identifying features of the $5 note.

G r a d e

L e v e l

8-12

C o n c e p t s

Currency features and history
Federal Reserve System
Functions of money

O b j e c t i v e s
Students will:
■■
Identify the features of the $5 note that refer to the Federal Reserve.
■■
Explain why Abraham Lincoln is featured on the $5 note.
■■
Identify three functions of money.
■■
Explain how the Federal Reserve supports money’s function as a store of value.

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Lesson Plan

C o n t e n t

S t a n d a r d

National Standards in Economics
Standard 11: Money makes it easier to trade, borrow, save, invest and compare the
value of goods and services.
Benchmark 1, Grade 8: As a store of value, money makes it easier for people to
save and defer consumption until the future.
Benchmark 2, Grade 8: As a unit of account, money is used to compare the market value of different goods and services.
Standard 20: Federal government budgetary policy and the Federal Reserve System’s
monetary policy influence the overall levels of employment, output and prices.
Benchmark 8, Grades 9-12: Monetary policies are decisions by the Federal Reserve
System that lead to changes in the supply of money and the availability of credit.
Changes in the money supply can influence overall levels of spending, employment and prices in the economy by inducing changes in interest rates charged for
credit and by affecting the levels of personal and business investment spending.

National Council for the Social Studies Strands
Power, authority and governance

T i m e

R e q u i r e d

60 minutes

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Lesson Plan

M a t e r i a l s
A copy of Handouts 1, 2, 3, 4 and 5 for each student
A sheet of chart paper and colored markers for each group
Visuals 1, 2 and 3
One classroom item for each group, such as a stapler, tape, calculator, tablet, etc.

P r o c e d u r e s

1.	

Hold up any denomination of currency and ask students to identify what it is.
(Answers will vary but may include money, a dollar bill, a piece of currency, etc.)

2.	

Explain that several terms may be used to describe this bill. Those terms include:
•	 money, because it is exchanged for goods and services;
•	 currency, because bills are a paper-based form of money as opposed to coins;
or
•	 note, because the phrase “Federal Reserve Note” is at the top of the face of
the currency. (The term note is a formal term that we often interchange
with the term bill.)

3.	

Distribute a copy of Handout 1: Who Is Pictured on the Currency? to each student.
Direct students to work in pairs to identify who is pictured on each denomination of currency. Ask students the following questions.
•	 Who is pictured on the $1 note? (George Washington, first U.S. president)
•	 Who is pictured on the $2 note? (Thomas Jefferson, third U.S. president)
•	 Who is pictured on the $5 note? (Abraham Lincoln, 16th U.S. president)
•	 Who is pictured on the $10 note? (Alexander Hamilton, first Secretary of
the Treasury)
•	 Who is pictured on the $20 note? (Andrew Jackson, seventh U.S. president)
•	 Who is pictured on the $50 note? (Ulysses S. Grant, 18th U.S. president)
•	 Who is pictured on the $100 note? (Benjamin Franklin, statesman)

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Currency

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Lesson Plan
4.	

Ask students whether all seven people pictured on U.S. currency are former
presidents of the United States? (No, Hamilton and Franklin did not hold the office
of president.)

5.	

Ask students to think about the seven people pictured on currency and, working
in pairs, to list three adjectives that would describe these seven individuals.
(Possible correct and incorrect answers might include well-known historical figures,
male gender, held elected office, are deceased, were popular, etc.)

6.	

Tell students that the Secretary of the Treasury is responsible for the selection of
the designs, including the portraits, which appear on paper currency. According
to the Department of Treasury, Bureau of Engraving and Printing, “The portraits currently appearing on the various denominations of paper currency were
adopted in 1929 when the size of the notes was reduced. … It was determined
that portraits of presidents of the United States have a more permanent familiarity in the minds of the public than any others. … Treasury Department records
do not reveal the reason that portraits of these particular statesmen were chosen
in preference to those of other persons of equal importance and prominence. By
law, only the portrait of a deceased individual may appear on U.S. currency and
[government] securities.” (www.moneyfactory.gov/document.cfm/18/2041/118)

7.	

Ask students the following questions.
•	 Based on this information from the Bureau of Engraving and Printing, which
prints currency, what are three adjectives that we could use to describe the
selection of the portrait for currency? Have students recall the adjectives
that were generated when discussing the seven individuals pictures on U.S.
currency. (Possible answers might include well-known person, deceased, made a
significant contribution to the nation—such as a president or statesman.)
•	 Which of these descriptions fit Abraham Lincoln? (All of the descriptions
fit Lincoln.)

8.	

Point out that according to a book the Bureau of Engraving and Printing wrote
for its Centennial (1862-1962) the reason given for selecting Lincoln for the
$5 note as follows: “because he followed Washington in the rank of American
heroes and it seemed logical that Abe’s likeness should appear on the denomination having the second-largest circulation.” (www.treas.gov/education/faq/currency/portraits.html) (Note: The $5 note had the second-largest circulation at the
time Lincoln was chosen to appear on it.)

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Currency

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Lesson Plan
9.	

Display Visual 1: The Lincoln Five. Tell students that they will be looking for
clues about the Federal Reserve on the $5 note. Tell students that each year the
Bureau of Engraving and Printing prints billions of notes (currency) for delivery
to the Federal Reserve System, also known as “The Fed.” Ask the students if
they know what the Fed is. (Answers will vary.) Distribute a copy of Handout
2: The Federal Reserve and instruct students to use the handout to take notes.
Discuss the following about the Federal Reserve.
•	 The Fed is the central bank of the United States. It is composed of 12
regional Reserve banks located in cities across the nation from New York to
San Francisco and a Board of Governors in Washington, D.C.
•	 The Fed serves as a bank for banks and performs many services for financial
institutions that a local financial institution performs for people. What services do banks provide for their clients? (Answers will vary but may include:
holds my checking account deposit, provides currency and coin, or clears checks.)
•	 Regional Federal Reserve banks hold deposits for banks, store banks’ excess
currency in the Fed vaults, provide currency for banks and provide checkclearing services.
•	 The Fed serves as a bank for the U.S. government. As such, it holds checking accounts for the government, receives revenue for the government—such
as tax payments—and provides other U.S. Treasury services, such as issuing
treasury notes for the government.
•	 The Fed is responsible for managing the money supply of the United States.
The Fed’s job is to make sure that the prices of goods and services are relatively stable over time.

10.	 Give each student a copy of Handout 3: The Lincoln Five and Handout 4: Fed
Facts. Instruct students to circle on Handout 3 features that indicate a connection to the Federal Reserve. Tell students to use Handout 4 for clues. Call on
students to tell you what they circled, and display Visual 2: The Federal Reserve
System and Our Nation’s Currency. Use Visual 2 to explain the Fed’s connection
to the features on the note.
11.	 Divide students into groups of four. Give each group an item from the classroom
such as one of the following: stapler, tape, pen, calculator, tablet or a related or
similar item. Instruct each group to identify one to two functions for its item. Call
on groups to share answers. (Answers will vary, but might include: stapler—attaching
papers, maybe removing staples; pen—recording information, drawing; calculator—
tabulating numbers; tablet —surface for recording information, for drawing)
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Lesson Plan

12.	 Ask students what function they need from money. (Answers will vary but may
include: to buy stuff, make me rich, provide a way for me to save, etc.)
13.	 Display Visual 3: Three Functions of Money and explain that money—like staplers, tape, pens, calculators and many other items—performs important functions. If something is a good form of money, it serves these three functions:
•	 Medium of exchange: It can be used to buy goods and services. Usually, to
be a good medium of exchange, an item used as money should be generally
acceptable, durable, portable, divisible and relatively scarce.
•	 Store of value: It keeps its purchasing power over time. People expect to be
able to hold money and use it in the future to buy goods and services.
•	 Unit of account: It indicates how much different goods and services are
worth. In stores in the United States, prices are recorded in dollars and cents.
14.	 Ask students to determine, based on the three criteria above, if the following
items would serve effectively as money.
•	 Bananas (No, bananas wouldn’t be a good store of value when they started to spoil.)
•	 Seashells (No, they wouldn’t effectively perform as a medium of exchange because
in some areas—near the ocean—they’re not relatively scarce.)
•	 Cows (No, they wouldn’t effectively perform as a medium of exchange because
they’re not easily divisible or portable. They wouldn’t perform effectively as a
store of value because they get sick and they die.)
•	 Plastic coins (Yes, plastic coins could serve as money if they had: designated
denominations or values, so that they could serve as a unit of account, and security
features, so that they weren’t replicable by the public and therefore would be relatively scarce, enabling them to serve their medium of exchange function.)
15.	 Explain to students that, in the past, items such as tobacco, fish and shells were
used as money. People are not still using these items as money because they
didn’t perform all three functions of money well. The U.S. currency and coin
that we use today does serve the three functions of money effectively.
16.	 Divide students into groups of 4-5 and assign each group one of the three functions of money. Instruct the groups to create a short skit or vignette that illustrates that function. The class will guess which function of money the group is
portraying after each skit is performed. Give students approximately five minutes
to plan their skit. Use the skits as an opportunity to reinforce the concepts of
“medium of exchange,” “store of value” and “unit of account.”
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Currency

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Lesson Plan

Cl o s u r e

17.	 Instruct students to refer to Handout 4: Fed Facts. Divide students into groups of
four. Distribute a piece of large chart paper and colored markers to each group.
Ask students to design a new $5 note that incorporates four facts about the Fed.
Have students designate a spokesperson and describe their newly designed currency, explaining how the Fed facts relate to their design.

A s s e s s m e n t

18.	 Distribute a copy of Handout 5: The Editor’s Inbox. Tell students to read the
e-mails and Janet Johnson’s responses. Instruct students to match each of the
messages with the corresponding letter by writing the number of the letter on
the blank line next to each of Ms. Johnson’s responses. Next, they are to state
whether Ms. Johnson’s e-mail response is accurate and explain why or why not.

Answers:
■■
■■

■■

■■
■■

■■

■■

Response to Message 5, 2, 6, 1, 3 and 4.
The response to Message 5 is accurate. Money facilitates saving for future
consumption.
The response to Message 2 is accurate. Currency is printed by the Bureau of
Engraving and Printing (BEP).
The response to Message 6 is accurate. U.S. money is not backed by gold.
The response to Message 1 is accurate. Each Federal Reserve bank is associated
with a letter and a number.
The response to Message 3 is accurate. The Fed puts currency and coin into circulation and is responsible for monetary policy, i.e. managing the U.S. money supply.
The response to Message 4 is incorrect. Ulysses S. Grant is pictured on the $50
note, not John F. Kennedy.

Note: The following sources provide information about currency and coin.
■■
U.S. Department of the Treasury coins and currency web site at www.ustreas.gov/
topics/currency/

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Currency

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Fed

Lesson Plan

■■
■■

■■

Bureau of Engraving and Printing web site at www.moneyfactory.gov/
Board of Governors of the Federal Reserve System web site at
www.federalreserve.gov
Federal Reserve Education web site at federalreserveeducation.org

19.	 Instruct students to use Handout 4: Fed Facts and Handout 2: The Federal Reserve
to create an original letter to the editor—using the same topics used in this lesson, such as the Fed, functions of money and features of money. Students should
also create a response to that letter; the response can be either accurate or inaccurate. These letters and responses should fit on one side of a page.
Have students exchange their letter and response with a partner. The partners
should read the letter and response and give a written response on the back side of
the page, explaining whether or not the student’s response was accurate and why.
Student pairs end the activity by discussing the accuracy of each response and its
evaluation by the reader. Students’ work can be evaluated in terms of how they
apply language and letter-writing skills and/or in terms of the accuracy of their
response for their own letter, as well as the evaluation of their partner’s letter.

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Currency

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Handout 1: Who Is Pictured on the Currency?
Directions: Write the name of the person who is pictured on each of the following.

	

____________________________________

	

____________________________________

	

____________________________________

	

____________________________________

	

____________________________________

	

____________________________________

	

____________________________________

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Currency

and the

Fed

Handout 2: The Federal Reserve
Use this page to take notes as your teacher discusses the Federal Reserve.
What is the Federal Reserve (the Fed)?_______________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
What services does the Fed provide for financial institutions? ____________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
What services does the Fed provide for the federal government? ___________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
What is the primary responsibility of the Fed? _________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________

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Currency

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Fed

Handout 3: The Lincoln Five
Instructions: Circle features on the $5 note below that refer to the Federal Reserve System.

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Currency

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Fed

Handout 4: Fed Facts
The Federal Reserve System is our nation’s central bank. It is composed of the Board of
Governors in Washington, D.C. and 12 regional Federal Reserve banks. Each Federal
Reserve note includes a letter and number indicator representing one of the banks.
Boston-A1

Richmond-E5

Minneapolis-I9

New York-B2

Atlanta-F6

Kansas City-J10

Philadelpia-C3

Chicago-G7

Dallas-K11

Cleveland-D4

St. Louis-H8

San Francisco-L12

The Federal Reserve, often referred to as “The Fed,” promotes a stable financial system
for the nation. It serves as a “banker’s bank” as well as a bank for our government.
The Federal Reserve System provides financial services, including electronic payments,
cash services and check collection.
The Fed determines the supply of money in the economy and adjusts interest rates, i.e.,
the price of credit. This is known as “monetary policy.”
The $5 bill and all other denominations are officially known as Federal Reserve notes.
Their value is established by government declaration and isn’t backed by gold or any
other commodity. Money not backed by a commodity is called “fiat money.” The
word “fiat” means authorization or sanction. Our currency and coin is sanctioned or
authorized by the U.S. government.

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Handout 5: The Editor’s Inbox
Janet Johnson graduated with a degree in journalism and has worked at a metropolitan
newspaper for two years. Ms. Johnson’s supervisor usually answers e-mails to the editor, but he has asked Ms. Johnson to answer the messages this week while he is out of
town. Since this is Personal Financial Literacy week, she has received numerous e-mails
about money.
Read the messages on the following pages and Ms. Johnson’s responses. Decide which
response goes with each message by placing a number on the line next to the response.
State whether the response e-mail is accurate and explain why or why not.

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Handout 5: The Editor’s Inbox

Message 1
editor@metronews.com

Letters and Numbers
Dear Editor:
I was looking at some $5 bills the other day and noticed a number and letter in the
upper-left corner. One of the bills had “E5.” That made sense to me because it is a
$5 bill. But the other two bills had “K11” and “H8.” I know there’s no such thing as an
$11 bill or an $8 bill. Can you explain what the letter and number stand for?
Sincerely,
Roberto Alvarez

Message 2
editor@metronews.com

Printing Currency
Dear Editor:
Yesterday on the “Money Makes the Word Go Round” radio program, a commentator said that currency is printed by the Bureau of Engraving and Printing (BEP).
When I looked at the currency in my wallet, however, I didn’t see the BEP mentioned
anywhere. I did see the signature of the Treasurer of the United States. Who prints
currency?
Curiously yours,
James Carter

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Handout 5: The Editor’s Inbox

Message 3
editor@metronews.com

Bills or Notes?
Dear Editor:
My daughter is taking a personal finance class. She informed me that what I call
a “dollar bill” is really a Federal Reserve note. What does the Fed have to do with
money?
Yours truly,
Lillian Randall

Message 4
editor@metronews.com

Faces
Dear Editor:
I saw an article in your paper last week which discussed a newly designed $5 note
with Lincoln’s portrait. A friend at work and I were trying to recall who’s face is on
each note. All I remembered is that all the faces are of former presidents of the
United States. Can you tell me who is on what note?
Sincerely,
Lawrence Kim

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Currency

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Handout 5: The Editor’s Inbox

Message 5
editor@metronews.com

Do we need money?
Dear Editor:
A friend and I are doing a report for school on money. My friend said that we could
do without money, but that doesn’t make sense to me. How would we save?
Sincerely,
Jennifer Clark

Message 6
editor@metronews.com

What’s the value?
Dear Editor:
I was surprised to hear on a financial news show that our money is not backed by
gold. What gives our money value? Certainly the paper it’s printed on couldn’t be
worth much!
Confused,
T. Emmit Coffman

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Handout 5: The Editor’s Inbox
Below are the e-mails that Janet Johnson wrote in response to The Editor’s Inbox questions:
Response to message # _____
You have asked a very good question. If we didn’t have money, it would be very difficult to exchange goods and services since money serves as a medium of exchange.
But it would be possible to obtain some goods and services through barter. For example, you mow my lawn and I’ll send you a weekly subscription to the newspaper.
But you also need money to serve as a store of value. You can save money today
for future college expenses or to purchase a car. So you’re exactly right in your
observation that we need money so that we can save for the future. And I’m glad to
see that you’re thinking about saving!
Inbox Editor

Why is the response correct or incorrect?
_____________________________________________________________________
_____________________________________________________________________	
Response to message # _____
The radio commentator’s statement that U.S. currency is printed by the Bureau of
Engraving and Printing (BEP) is correct. The reason you see the Treasury’s seal is
that the BEP is an agency of the Treasury. Since you’re so observant, I’m sure you
noticed the other seal—that of the Federal Reserve System. The Fed doesn’t print
currency but does distribute currency to financial institutions.
Inbox Editor

Why is the response correct or incorrect?
_____________________________________________________________________
_____________________________________________________________________

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Handout 5: The Editor’s Inbox
Response to message # _____
Some people are under the misconception that our money is backed by gold. Our
money is no longer backed by gold or any other precious metal or commodity. It
is backed by faith in the government, which issues the currency and coin. This
includes trust that the government will make sound fiscal decisions and that the Federal Reserve will make sound monetary policy decisions to ensure price stability.
Inbox Editor

Why is the response correct or incorrect?
_____________________________________________________________________
_____________________________________________________________________	
Response to message # _____
You’re right. The last time I looked, I didn’t see any $8 or $11 bills in my wallet. The
letter and the number are the designation for the Federal Reserve bank which issued
the note. There are 12 Reserve banks; so, you can look for designations from A1 to
L12. I was curious about the designations so I did some research. Here are the 12
designations for the Reserve banks:
Boston-A1		
New York-B2		
Philadelpia-C3		
Cleveland-D4		

Richmond-E5		
Atlanta-F6		
Chicago-G7		
St. Louis-H8		

Minneapolis-I9
Kansas City-J10
Dallas-K11
San Francisco-L12

Inbox Editor

Why is the response correct or incorrect?
_____________________________________________________________________
_____________________________________________________________________

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Currency

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Fed

Handout 5: The Editor’s Inbox
Response to message # _____
As a matter of fact, the Fed has quite a lot to do with money. Although the Federal
Reserve doesn’t print currency or mint coin, it does put these into circulation by
providing currency and coin to financial institutions. Furthermore, the Fed’s management of the money supply, or monetary policy, is designed to foster stable prices,
which helps money fulfill its function as a store of value—i.e., keeping its purchasing
power over time. The Fed’s responsibility to provide a safe and sound payments
system includes providing financial services such as electronic payments, cash
services and check collection. The Fed is known as a “banker’s bank” as well as the
bank for our government. It turns out the Fed has quite a bit to do with money!
Inbox Editor

Why is the response correct or incorrect?
_____________________________________________________________________
_____________________________________________________________________	
Response to message # _____
Although many of the portraits on Federal Reserve notes are those of former presidents, not all were presidents or even held an elected office. Here’s who you’ll find:
$1 – George Washington	
$2 – Thomas Jefferson		
$5 – Abraham Lincoln		
$10 – Alexander Hamilton

$20 – Andrew Jackson
$50 – John F. Kennedy
$100 – Benjamin Franklin

Of the list above, Hamilton and Franklin never served as president.
Inbox Editor

Why is the response correct or incorrect?
_____________________________________________________________________
_____________________________________________________________________
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Visual 1: The Lincoln Five

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20

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Visual 2: The Federal Reserve System and Our Nation’s Currency

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Currency
Fed

21

Currency

and the

Fed

Visual 3: Three Functions of Money

Money is anything that serves these
three functions:
Medium of exchange—It can be used
to buy goods and services.
Store of value—It keeps its purchasing power over time.
Unit of account—It tells you how
much different goods and services
are worth.

Permission is granted to reprint or photocopy this lesson in its entirety for educational purposes, provided the user credits the
Federal Reserve Bank of St. Louis. www.stlouisfed.org/education

22


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102