You hold the two main controls. Your job: stable prices, full employment, and a stable currency — all at once. See how far you get.
Move the levers and watch all three goals respond at the same time. Try to light up all three green.
Loose policy (low rates, easing) creates jobs and lifts asset prices — but pushes inflation up and the currency down. Tight policy does the reverse, and pushed far enough it strains the financial system. The classic inflation-versus-unemployment tension is real (and itself breaks down in stagflation, when both rise together). This model can't reach all three goals at once — which is the point. Real central bankers face the same bind with far more variables, lags, and uncertainty, plus shocks that move the targets after they've chosen. There is no neutral setting: every choice helps some people and costs others.
This is a transparent stylized model, not a forecast. The directions are grounded — easing raises inflation and employment and weakens the dollar; tightening reverses it — but the exact coefficients are illustrative, chosen so the tradeoff is visible, not precise predictions.
For interest rate r and easing level q (−3…+3):
inflation = 2 + 1.6q − 0.30r; jobs = (6.5 − r) + 1.6q; currency = r − 2q; stress = 0.6r (plus a jump under heavy tightening). Goals: prices 1–3%, jobs strong, currency steady with stress contained.
The Fed's legal "dual mandate" is maximum employment and stable prices (Federal Reserve Act). Real anchors: the Volcker disinflation pushed rates to ~20% in 1980–82 and caused a deep recession; 2020–2022 easing coincided with the fastest M2 growth on record and an inflation surge (FRED, BLS). Verify current figures before relying on them. Education, not financial advice.
Federal Reserve — mandate · FRED federal funds rate · BLS CPI