The intertemporal model

Every choice between spending now and spending later comes down to one comparison: what a unit saved costs you today, and what it buys you tomorrow. That comparison is the Euler equation, and this workbench is built around it.

Part I starts with one household and adds a market, credit limits, taxes, firms and work, one at a time, until the economy sets its own interest rate: the natural rate. Part II hands the rate to the Fed and follows what happens to consumption, investment and output when it moves.

On each page, save a prediction, explore the model, then choose “I’m ready to explain what I found” to open the After question. Your answers stay in this tab only and are cleared when you reload or close the page.