- Financial Literacy Year Round
- Making Financial Decisions
- National Debt vs. Legacy
- Banking Technologically
- Inflation and the Apptivity of the Month
- Where Are the Jobs?
- An Update of a Classic: Katrina's Classroom
- By the Numbers
- Uncle Jed Teaches Social Studies
- Commerce on the Canvas
- Apptivity of the Month: FRED
- Tapering and the Road Ahead
- Big Data, Big Changes
- Video Q&A with the Fed Explained
- Apptivity of the Month: Building Wealth
- Unemployment Rate Myths
DepartmentsCalendar of Events
Quantitative Easing, Tapering, and the Road Ahead
On December 18, 2013, the Federal Open Market Committee (FOMC) voted in favor of tapering its asset purchase program, called quantitative easing (QE). The FOMC agreed to reduce purchases in January 2014 by $10 billion a month to $75 billion.
To begin a classroom discussion on this nontraditional monetary policy tool and the FOMC decision to taper, first have your students read an article that Dennis Lockhart, Atlanta Fed president and chief executive officer, wrote, in which he clearly explains what went into the decision. "Fed@Issue: Monetary Policy and the Road Ahead" appears in the fourth-quarter issue of the Atlanta Fed's EconSouth magazine.
You can then use the following questions to guide the discussion.
- Define tapering using evidence from the text.
- Define quantitative easing (QE) using evidence from the text. What is another term used to describe this program?
- According to the FOMC's December statement, why did the Committee decide to begin tapering the QE program?
- Cite evidence from the article to explain President Lockhart's position on the decision to taper.
- Upon what price index does the FOMC base its official 2 percent inflation target?
- What does President Lockhart have to say about the employment picture? Include both the positive and less than encouraging signs cited by President Lockhart.
- Using evidence from the text, what is meant by accommodative monetary policy and explain how two tools are being used to maintain this policy.
- Define forward guidance using evidence from the text.
- What is another, more common term for "short-term policy rate"?
- What is President Lockhart's baseline outlook for the economy in 2014?
macroblog: "The End of Asset Purchases: Is That the Big Question?"
Chairman Bernanke's speech at the annual meeting of the American Economic Association (January 3, 2014)
Minutes of the Federal Open Market Committee's December 17–18, 2013, meeting
President Lockhart's January 13, 2014, speech "Economic Outlook for 2014"
"Primer on Nontraditional Monetary Tools: The Maturity Extension Program" (Extra Credit article)
Statement of the Federal Open Market Committee's December 17–18, 2013, meeting
Video: FOMC Press Conference on December 18, 2013 / Press Conference Transcript
By Amy Hennessy, director of economic education, Federal Reserve Bank of Atlanta, and editorial director ofExtra Credit
January 21, 2014