Data sources & methodology
Good teaching tools show their work. Here is exactly where the data comes from and how the simulator calculates its results.
Historical data (History Replay & quizzes)
| Series | Source | Coverage |
|---|---|---|
| S&P 500 / Composite stock index (monthly average) | Robert J. Shiller, Irrational Exuberance online data (Yale University), via the open datasets/s-and-p-500 package | 1871–present |
| Consumer prices & inflation | U.S. Bureau of Labor Statistics CPI-U (1913–present); Shiller CPI series before 1913 | 1871–present |
| Long-term interest rate | Shiller long-term government bond yield (to 1953); Federal Reserve 10-year Treasury constant maturity (GS10) after | 1871–present |
| Real GDP growth | U.S. Bureau of Economic Analysis, NIPA real GDP (chained dollars) — annual 1929–1947, quarterly year-over-year after | 1929–2024 |
| Unemployment rate | BLS Current Population Survey annual averages (1941–present; ages 14+ before 1947); Stanley Lebergott’s estimates as published in Historical Statistics of the United States (1929–1940); monthly BLS data for 2020–21 | 1929–present |
| Federal funds rate | Federal Reserve (FRED: FEDFUNDS), annual averages, with monthly values for 2008, 2020 and 2022 | 1955–present |
| Home prices | S&P CoreLogic Case-Shiller U.S. National Home Price Index (not seasonally adjusted) | 1975–present |
| World GDP | World Bank, World Development Indicators (current US$) | 1960–present |
| Recession dates | National Bureau of Economic Research (NBER) Business Cycle Dating Committee | 1873–present |
When the site administrator connects the Federal Reserve Bank of St. Louis FRED API, official monthly series (UNRATE, CPIAUCSL, FEDFUNDS, GS10, MORTGAGE30US, GDPC1, CSUSHPINSA, M2SL) replace the built-in values. Annual figures are drawn as step lines so students can see their frequency. Data can be revised by the agencies; check the original sources for research use.
How the simulator works
The simulator is a small, transparent teaching model of the U.S. economy that runs in your browser, one quarter at a time for five years. It is built from relationships taught in introductory macroeconomics, with round-number coefficients chosen so effects have realistic signs and sizes. It is not a forecast.
- Aggregate demand (IS curve). The output gap moves gradually toward a target set by the real interest rate relative to its neutral level, mortgage rates, fiscal policy (spending raises demand roughly one-for-one; tax changes a bit less), confidence, credit conditions, money growth, world growth, tariffs, energy prices, disasters and wealth effects from stocks and housing.
- Okun’s law. Unemployment moves toward the natural rate minus half the output gap.
- Phillips curve with expectations. Inflation = expected inflation + 0.28 × output gap + supply shocks (energy, tariffs, disasters, productivity) + excess money growth. Expectations adapt to actual inflation and are gently anchored to 2%.
- Monetary policy. The Fed holds the rate you choose, or (with Auto on) follows a Taylor rule: neutral rate + inflation + 0.5 × (inflation − 2) + 0.5 × output gap.
- Interest rates. The 10-year yield blends the current policy rate with the neutral rate plus expected inflation and a term premium that rises with deficits and debt. Mortgage rates add a spread that widens when lending tightens.
- Housing and stocks. Home-price growth responds to mortgage rates, credit, zoning, population, inflation and the output gap. Stock prices follow nominal GDP and profit margins, discounted by bond yields plus a risk premium that rises with fear.
- Government budget. Deficit = spending + automatic stabilizers + interest − revenue (which rises in booms). Debt grows with deficits and shrinks relative to a growing nominal GDP.
- Status labels (recession, depression, stagflation…) are rules of thumb applied to the simulated numbers each quarter.
The model’s full source code is in assets/js/engine.js and can be read by anyone. The History Replay “what-if” lines add the simulator’s estimated difference between a changed and unchanged economy to the real historical path — a rough illustration, not a precise counterfactual.