Inflation Model Lab
Inflation Model — Phillips Curve & Expectations
Inflation models link the rate of price increase to labor market slack, inflation expectations, and supply shocks via the Phillips curve relationship. This simulator lets you shift the output gap, change expectation-formation rules (adaptive vs. rational), and apply cost-push shocks to see how inflation trajectories differ under each assumption. The expectations-augmented Phillips curve and the de-anchoring of expectations are key results to explore.
What you can do in this simulation
- Adjust the output gap and trace movement along the short-run Phillips curve
- Switch between adaptive and rational expectation formation and compare inflation paths
- Apply a supply shock (oil price spike) and observe stagflation dynamics
- Run a disinflationary monetary contraction and track the sacrifice ratio
- Plot the long-run vertical Phillips curve as expectations fully adjust
Concepts covered
Phillips curve · inflation expectations · output gap · stagflation · sacrifice ratio · NAIRU
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