🧪 Economics Monetary Policy Simulation

Central banks do not set the interest rate by decree — they hit a target rate by trading in the market for bank reserves. This simulator renders that market in 3D: a downward-sloping demand curve for reserves runs from the discount-window rate (the ceiling, where banks would rather borrow from the central bank than pay more) down to the interest-on-excess-reserves rate (the floor, below which no bank will lend for less than it already earns by parking reserves), and a vertical supply line marks exactly how many reserves the central bank has injected through open-market bond purchases and sales. Move the reserve-requirement ratio and the demand curve itself slides sideways; buy or sell bonds and the supply line slides along it, changing where the two intersect — and that intersection is the federal funds rate. A grid of individual bank reserve balances shows, bank by bank, who is sitting on excess reserves and who is scrambling to cover a shortfall at whatever the market clears at.