FAQ
Short answers to the questions the simulator tends to raise.
Does printing money always cause inflation?
No, and that is one of the first things the simulator shows. The quantity theory MV=PY is an accounting identity, not an automatic law. Money growth turns into inflation only to the extent it is not absorbed by more output or by changes in how fast money circulates. Print money into a slack economy and a lot can go into growth; print it into a hot one and it goes straight into prices.
Why does inflation keep rising even after I stop the stimulus?
Expectations. Once people expect higher inflation, they raise prices and ask for higher wages ahead of time, which makes the inflation real. That feedback loop is why inflation has momentum, and why losing the central bank's credibility is so costly.
Why does crushing inflation throw people out of work?
Higher interest rates cool demand by making borrowing expensive. Less demand means less output and fewer jobs, with a lag. That is the short-run trade-off the Volcker scenario shows. Importantly it is temporary: let the simulation run on and unemployment returns to normal while inflation stays low. There is no permanent menu where more inflation buys you lower unemployment.
What is the model behind this?
A discrete-time 3-equation New Keynesian model: a dynamic IS curve linking interest rates to demand, an expectations-augmented Phillips curve linking demand and expectations to inflation, and a Taylor rule for monetary policy. Plus Okun's law, the quantity theory of money, and an endogenous credibility channel. See the methodology page for the equations and sources.
Can I trust the Monte Carlo numbers?
Treat them as illustration, not prophecy. The uncertainty view runs the same model thousands of times with the genuinely uncertain levers jittered around your settings. The band shows where most of those model runs land given your assumptions. It is not a forecast and not a probability about the real economy, and the assumptions that produce it are shown right next to it.
Why do my results differ from real history?
Because this is a stylised teaching model, calibrated to get the direction and shape of episodes right, not their exact magnitudes. Real economies are open, messy and full of one-off events. The model is honest about its limits on the methodology page.
Still curious? The methodology page has the equations and the primary sources.