The original Phillips curve showed a trade-off between inflation and unemployment. After the 1970s stagflation, economists added inflation expectations: the trade-off holds only in the short run. The curve was very flat in the 2010s and steepened in 2021–22.
How to use the Phillips Curve Calculator
- Expected inflation
- Actual unemployment rate
- Natural unemployment rate
- Slope (β)
- Supply shock
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter expected inflation, the actual and natural unemployment rates, the slope β and any supply shock.
Tips
- Use real (inflation-adjusted) figures to compare across years.
- Check whether data are seasonally adjusted.
- Use the same currency and base year throughout.
- Economic models simplify reality – treat results as illustrations, not forecasts.
Common mistakes to avoid
- Mixing nominal and real values.
- Comparing percentage changes with percentage-point changes.
- Treating correlations as causes.
Inputs explained
| Field | What to enter |
|---|---|
| Expected inflation | In % |
| Actual unemployment rate | In % |
| Natural unemployment rate | In % |
| Slope (β) | A number |
| Supply shock | In % |
What each result means
- Predicted inflation = [Expected inflation] – [Slope (β)]×([Actual unemployment rate] – [Natural unemployment rate]) + [Supply shock]
- Unemployment gap = [Actual unemployment rate] – [Natural unemployment rate]
Example values
How the main result changes when Expected inflation changes and everything else stays at the example values above:
| Expected inflation (%) | Predicted inflation (%) |
|---|---|
| 1.25 | 1.5 |
| 1.88 | 2.13 |
| 2.5 | 2.75 |
| 3.13 | 3.38 |
| 3.75 | 4 |
| 5 | 5.25 |
Formula
π = πᵉ − β × (u − uₙ) + supply shockWorked example
Inputs — Expected inflation: 2.5 %; Actual unemployment rate: 3.8 %; Natural unemployment rate: 4.3 %; Slope (β): 0.5; Supply shock: 0 %.
Results — Predicted inflation = 2.75 %; Unemployment gap = -0.5 %.
Frequently asked questions
What is the Phillips curve?
The short-run trade-off between unemployment and inflation.
Does the Phillips curve still hold?
Loosely in the short run, especially when expectations are anchored.
What is the expectations-augmented Phillips curve?
Inflation depends on expected inflation and the unemployment gap.
What formula does the Phillips Curve Calculator use?
π = πᵉ − β × (u − uₙ) + supply shock.