Economics · Year 13

Active learning ideas

Functions of Financial Markets

Active learning works well for this topic because financial markets function through real-time interactions like lending, borrowing, and risk-taking. Students need to experience these dynamics directly to grasp concepts like liquidity, credit creation, and systemic risk that are otherwise abstract.

• National Curriculum Attainment Targets
• A-Level: Economics - The Financial Sector
• A-Level: Economics - Financial Markets and Regulation

• 30–50 min
• Pairs → Whole Class
• 3 activities

Activity 01

• Simulation Game
• 40 min · Whole Class

Simulation Game: The Bank Run

Students act as depositors in a bank. A 'rumor' is spread about the bank's stability. Students must decide whether to withdraw their 'money' (tokens). This illustrates how fractional reserve banking works and why liquidity is crucial for financial stability.

Analyze how financial markets facilitate the efficient allocation of capital.

Facilitation Tip

During the Bank Run simulation, circulate and prompt groups to explain why their bank’s reserve ratio matters to their survival, linking it to liquidity risk.

What to look for

On an index card, ask students to: 1. Identify one type of financial intermediary and explain its primary function. 2. Briefly describe the difference between a money market and a capital market.

• Apply
• Analyze
• Evaluate
• Create
• Social Awareness
• Decision-Making

Activity 02

• Inquiry Circle
• 50 min · Small Groups

Inquiry Circle: The 2008 Post-Mortem

Groups are assigned different 'culprits' of the 2008 crisis (e.g., subprime lenders, credit rating agencies, regulators). They must investigate their role and present a 'case' for why their group was most responsible for the systemic failure.

Explain the role of financial intermediaries in connecting savers and borrowers.

Facilitation Tip

For the 2008 Post-Mortem investigation, assign roles so each student analyzes one stakeholder’s decisions and connects their actions to broader market failure.

What to look for

Pose the question: 'How might a well-functioning financial market contribute more to economic growth than a poorly regulated one?' Guide students to discuss capital allocation, investment incentives, and risk sharing.

• Analyze
• Evaluate
• Create
• Self-Management
• Self-Awareness

Activity 03

• Think-Pair-Share
• 30 min · Pairs

Think-Pair-Share: Moral Hazard in Banking

Students are given the scenario of a 'Too Big to Fail' bank. They pair up to discuss how government bailouts create an incentive for banks to take even bigger risks in the future, then brainstorm ways to prevent this.

Differentiate between money markets and capital markets.

Facilitation Tip

Use Think-Pair-Share for moral hazard to first let students articulate their own views before confronting counterarguments from peers.

What to look for

Present students with short scenarios: 'A startup needs venture capital for expansion' or 'A government needs to finance a new infrastructure project.' Ask them to identify which market (money or capital) and which type of intermediary would be most appropriate for each scenario and why.

• Understand
• Apply
• Analyze
• Self-Awareness
• Relationship Skills

A few notes on teaching this unit

Teach this topic by grounding abstract ideas in concrete, relatable scenarios. Avoid over-reliance on textbook definitions; instead, use simulations and case studies to show how financial systems behave under stress. Research shows students retain concepts better when they see cause-and-effect relationships in action, so prioritize activities that force them to make decisions with real consequences.

Successful learning looks like students confidently explaining how banks create money, identifying key differences between market types, and recognizing why regulation matters beyond individual protection. Evidence includes clear articulation of roles, functions, and consequences in discussions and written work.

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Watch Out for These Misconceptions

• During the Simulation: The Bank Run, watch for students assuming banks keep all deposited money in vaults.

  Use the bank run simulation’s balance sheets to show how fractional reserve banking works. Ask students to adjust their reserve ratios and observe how lending creates credit, then trigger a withdrawal scenario to reveal liquidity gaps.

• During Collaborative Investigation: The 2008 Post-Mortem, watch for students believing financial regulation only protects consumers from fraud.

  In the investigation, have students categorize each regulatory failure they identify as either consumer-focused or system-focused. Use their findings to highlight macroprudential tools like capital requirements and stress tests that prevent broader crises.

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Methods used in this brief

• Simulation Game
• Inquiry Circle
• Think-Pair-Share