Quantitative Easing (Online Lesson)
- AS, A-Level, IB
- AQA, Edexcel, OCR, IB, Eduqas, WJEC
Last updated 27 Apr 2020
In this online lesson, we introduce the topic of Quantitative Easing (QE) as part of our mini-series on monetary policy.
WHAT YOU'LL STUDY IN THIS ONLINE LESSON
- what is meant by a bond, and why bond prices are inversely related to their yields
- how the use of QE should, in theory, impact on the economy
- how to use a range of diagrams to support understanding and analysis of QE
- an overview of the UK's QE programme
- key evaluation points for QE
Additional teacher guidance is available at the end of this lesson.
Thank you to Nicky King and Jon Clark for their contributions to this lesson.
HOW TO USE THIS ONLINE LESSON
Follow along in order of the activities shown below. One is interactive game-based activity, designed to test your understanding and application of QE. Others are based on short videos, including activities for you to think about and try at home.
If you would like to download a simple PDF worksheet to accompany the video activities, you can download it here: Quantitative Easing. You can print it off and annotate it for your own notes, or make your own notes on a separate piece of paper to add to your school/college file.
ACTIVITY 1: VIDEO - WHAT IS A BOND?
This introductory video covers the bond market. This topic is important to understand because it helps you to analyse the QE process in more detail.
ACTIVITY 2: THINKING ACTIVITY - MORE ON BONDS
To help build your skills of analysis with the bond market, as well as having the opportunity to practise some more calculations in relation to bonds, download this Strong Bonds activity. You may want to discuss your answers with your teacher and / or classmates.
ACTIVITY 3: VIDEO - INTRODUCTION TO QE
This video-based activity provides an introduction to QE. You will cover the essential key terms, along with learning how to write exam-standard analytical chains, and consider the reasons why a Central Bank might need to use QE.
ACTIVITY 3: READING AND THINKING - PEOPLE'S QE
Whilst many economists and politicians think that QE has been largely successful, there are many people who think that it has mostly benefited the "already well-off". One suggestion put forward by this group is the possible use of "People's QE", in which the Central Bank doesn't just buy government bonds or corporate bonds, but gets more actively involved in small businesses. Below, you will find some links for wider reading:
- QE for the People, from Positive Money
- The Wikipedia summary of People's QE
- Jim O'Neill's analysis of People's QE
- A summary of other wider reading on this topic from Better World - follow a few of the links that you think are most appealing
Task - write a short summary paragraph of what is meant by People's QE, noting down 2 advantages and 2 disadvantages of it as a policy approach
ACTIVITY 4: VIDEO - DIAGRAMMATIC ANALYSIS OF QE
In this video, we'll take you through some of the different approaches to analysing the impact of QE using diagrams. In particular, we look at the bond market, the foreign exchange market, and the money market, before finishing up by considering the wider macro impact using AD/AS analysis.
ACTIVITY 5: GAME - QE KEY TERMS
Challenge yourself with this game, testing your knowledge of key terms relating to quantitative easing.
ACTIVITY 6: VIDEO - THE UK'S QE PROGRAMME
Having real-world knowledge of macro policies is important for your exams and also your wider awareness of the economy. In this video, we take a quick look at some of the key aspects of the UK's QE programme, including the more recent QE carried out in response to the impact of COVID-19.
ACTIVITY 7: READING AND RESEARCH - RECENT QE EXAMPLES
Many governments and Central Banks have had to rapidly introduce expansionary macro policies in order to keep their economies afloat in light of the COVID-19. One such policy used by a number of Central Banks is greater QE. Take a look at some of these articles outlining these policies:
- A neat summary of Central Bank responses to COVID-19 here
- The UK's Bank of England monetary programme, with additional reading on this here
- Unlimited use of QE in the US
- The response by the Bank of Japan
ACTIVITY 8: VIDEO - EVALUATING QE
In this final video for the online lesson, we take a closer look at some of the key evaluation points in relation to QE.
How might Central Banks "reverse" their QE programmes, and what would be the impact? Carry out your own wider reading and research to produce a short presentation on this topic.
ADDITIONAL TEACHER GUIDANCE
This lesson comprises:
- around 35 minutes of guided video, spread across 5 videos
- around 15 minutes of student activity and thinking time throughout those videos
- an interactive game, designed to test knowledge of key terms relating to QE
- plenty of additional wider reading, focusing on examples of QE in a range of countries and the possibility of using People's QE
- an extension task, looking at how QE could be reversed
The core activities in this lesson should take around 60 minutes.