Central Bank Simulator
You run the central bank for eight years. Set the interest rate, absorb oil shocks and recessions, and get graded at the end — with a diagnosis of exactly where your policy went wrong.
One tile of the full monetary policy unit.
The course teaches the machinery behind this game — how one interest rate moves through banks and borrowing into prices and jobs. Interactive lessons, practice with feedback, spaced reviews. Free.
A central bank has one of the strangest jobs in economics. It is asked to hit two targets at once: stable prices, meaning inflation near 2 percent, and full employment, meaning unemployment near 5 percent. This pair of goals is called the dual mandate. To hit both targets, the bank gets exactly one lever — the policy interest rate, the price of borrowing money that it can raise or cut. Raise the rate and the economy cools: borrowing slows, spending falls, inflation eases, but unemployment creeps up. Cut the rate and everything runs in reverse.
Three things make the job hard. First, the lever acts with a lag — the rate you set today mostly hits the economy next year, so you must steer by forecast, not by the current numbers. Second, not all trouble looks the same. A demand shock (say, a spending boom or a crash in confidence) pushes inflation and unemployment in a pattern where both goals call for the same response. A supply shock (say, an oil price spike) splits them apart: inflation says raise the rate, unemployment says cut it, and you cannot do both. Third, patience has a price. Let inflation run hot for years and people stop believing in the 2 percent target — economists say expectations become de-anchored — and once that trust is gone, every future year of inflation fighting gets more painful.
This simulator does one thing differently from most economics games: the engine is deterministic, meaning nothing is random. The live forecast you see before committing to a rate is exactly what will happen — barring the shocks the game announces to you in advance. No dice rolls, no hidden noise. That also means every run of a scenario is identical, so two students who make the same moves get the same score, and a whole class can compete on a level field.
How to play
- Two charts. Inflation on top, with a shaded band around the 2 percent target. Unemployment below, with a band around the 5 percent full-employment level. Your job is to keep both lines inside their bands.
- Shock cards. Some years open with a card announcing a shock. Blue cards are demand shocks — both goals point the same way, so the right move is clear. Red cards are supply shocks — the two goals fight each other, and you must pick which one to hurt.
- The rate slider and live forecast. Drag the slider and watch dotted forecast lines update on both charts. That preview is exactly what will happen if you commit. When you are ready, press Set rate · advance year.
- Why-it-moved boxes. After each year, short notes explain what pushed inflation and unemployment — your rate, the shock, or drifting expectations.
- The grade. After year eight you get a score and a named diagnosis — the specific way your policy failed (or the confirmation that it did not).
- Scenarios. A picker lets you replay history: The 2020s replay (the default), Stagflation 1979, The 2008 crash, and Pandemic whiplash. Each is a fixed eight-year arc, identical on every run.
What to try first: play a full run of The 2020s replay without touching the rate at all. Watch inflation escape its band and note the grade. Then replay it and lean against the first shock the year it lands. Compare the two diagnoses.
The simulator
What a good run looks like
No spoilers — but every high score follows the same four habits.
- Lean against demand shocks hard. When a blue card lands, both goals agree. Move the rate firmly in the direction they point — half-measures just stretch the pain over more years.
- Split the difference on supply shocks. When a red card lands, any rate you pick hurts one goal. Chasing inflation alone deepens the recession; chasing jobs alone lets prices rip. The best runs accept some damage on both charts.
- Never let inflation sit above target for years. A brief overshoot is recoverable. A long one de-anchors expectations, and after that every point of inflation costs more unemployment to remove.
- Respect the lag. Your rate mostly bites next year. Steer by the dotted forecast, not by this year's numbers — reacting to the present means arriving a year late, every time.
For instructors
Assign this to your class
Free, no account needed for students. Paste either snippet into Canvas, Moodle, Blackboard, Google Classroom, or your slide deck.
Sends students to the full page with the worked example and related lessons.
Inlines just the interactive widget in your LMS — no nav, no footer, no signup wall.
Because the engine is deterministic, every student plays the identical scenario — scores are directly comparable, which makes this a ready-made class competition. Highest grade on Stagflation 1979 wins.
What the course adds
Beyond this one page
The simulator shows you that the rate works; the monetary-policy unit shows you why. It covers the transmission chain from the policy rate through banks and borrowing to prices and jobs, open market operations, real vs. nominal rates, the zero lower bound, and quantitative easing — each with interactive graphs and adaptive practice.
Spaced reviews
FSRS brings every concept back right before you'd forget. ~50% better retention than re-reading.
Per-concept mastery
Performance Factor Analysis tracks each sub-skill separately — you see which version of the idea is still wobbly.
Diagnostic placement
A short test skips you past what you already know. No re-learning the basics.
Want to understand the machine you just drove?
The full Econ Academy macroeconomics course covers monetary policy from the money market up, with adaptive practice, spaced repetition, and mastery tracking so you stop forgetting what you just learned.