Exercises

Exercise 1: Build Both Models

Construct Loanable Funds and BOMD models in CircuitJS: 1. Verify accounting identities hold 2. Run with 1% deficit for 200 years 3. Compare debt/GDP trajectories 4. Identify which matches real-world behavior

Exercise 2: Parameter Sensitivity

Test different scenarios: 1. What deficit level is sustainable in Loanable Funds? (Answer: None!) 2. What happens if government runs surplus in BOMD? 3. Effect of different interest rates on debt dynamics 4. Impact of credit growth rates on money supply

Exercise 3: Policy Experiments

Model policy changes: 1. Austerity: Reduce SpendRate from 21% to 20% - Compare effects in both models - Observe private sector equity changes 2. Debt Jubilee: Reset DebtGov to zero - In Loanable Funds: Temporary relief - In BOMD: Destroys private assets! 3. Quantitative Easing: Central Bank buys bonds from private banks - Changes DebtGov holder but not magnitude

Exercise 4: Real-World Data

Compare model outputs to actual data: 1. US debt/GDP ratio (1950-2025) 2. Interest payments as % of GDP 3. Private sector wealth vs. government debt 4. Test which model fits better

Next: Key Takeaways →

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## Exercise 1: Build Both Models

Construct Loanable Funds and BOMD models in CircuitJS:
1. Verify accounting identities hold
2. Run with 1% deficit for 200 years
3. Compare debt/GDP trajectories
4. Identify which matches real-world behavior

## Exercise 2: Parameter Sensitivity

Test different scenarios:
1. What deficit level is sustainable in Loanable Funds? (Answer: None!)
2. What happens if government runs surplus in BOMD?
3. Effect of different interest rates on debt dynamics
4. Impact of credit growth rates on money supply

## Exercise 3: Policy Experiments

Model policy changes:
1. **Austerity**: Reduce SpendRate from 21% to 20%
   - Compare effects in both models
   - Observe private sector equity changes
2. **Debt Jubilee**: Reset DebtGov to zero
   - In Loanable Funds: Temporary relief
   - In BOMD: Destroys private assets!
3. **Quantitative Easing**: Central Bank buys bonds from private banks
   - Changes DebtGov holder but not magnitude

## Exercise 4: Real-World Data

Compare model outputs to actual data:
1. US debt/GDP ratio (1950-2025)
2. Interest payments as % of GDP
3. Private sector wealth vs. government debt
4. Test which model fits better

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