Finance

Phillips Curve Calculator

Model the tradeoff between inflation and unemployment.

Actual Unemployment Rate (%)

Natural Rate (NAIRU) (%)

Expected Inflation (%)

Sensitivity Coefficient (β)

Supply Shock (%)

Predicted Inflation —

Unemployment Gap —

Demand-Pull Effect —

Expectations-Augmented Phillips Curve:
π = π^e − β(u − u*) + ε
π = inflation, π^e = expected inflation, u = unemployment, u* = NAIRU, ε = supply shock

Understanding the Phillips Curve

The Phillips Curve describes an inverse relationship between inflation and unemployment. In the short run, lower unemployment leads to higher inflation as businesses compete for workers. The expectations-augmented version accounts for adaptive inflation expectations.