Week 12 — Inflation and Expectations Report: The Phillips Curve and the Quantity Equation

Assignment 11 of the term — read the short-run and long-run Phillips curves and the quantity equation with the course's numbers, explain what each figure means, and tell a relative why a little more inflation does not buy lower unemployment for good.

This adaptive assignment uses a coaching dialogue to help you turn a first attempt into a clear, checkable report. You remain the author. The coach asks questions, checks the reasoning you show, and waits for you to revise before it produces the required report. In Week 3 you measured inflation and unemployment, in Week 6 you saw expected inflation shift short-run aggregate supply, and in Weeks 10 and 11 you watched more money lower interest rates and raise output in the short run; this week you ask what lasts. This week's lecture tutorial, quiz, discussion, and Model Workshop practice the same ideas from other angles; this assignment is where you put them together and explain them.

The task

This report uses the week's illustrative numbers, constructed for this course and not real data: one short-run Phillips curve through 6 percent unemployment with 2 percent inflation and 4 percent unemployment with 6 percent inflation, with the natural rate midway between them; and a quantity equation with a money supply of 500 dollars, a velocity of 4, and real output of 1,000 units.

Work these four problems, showing every step on its own line:

1. In the course's illustrative economy, one short-run Phillips curve passes through 6 percent unemployment with 2 percent inflation and 4 percent unemployment with 6 percent inflation. Moving from the first point to the second, what is the slope of the curve, in percentage points of inflation per percentage point of unemployment?
2. In the same illustrative economy, the natural rate of unemployment sits midway between the two unemployment rates on the curve, 4 percent and 6 percent. Policy holds unemployment at 4 percent until workers and firms come to expect the 6 percent inflation that comes with it. At what unemployment rate, in percent, does the economy settle in the long run?
3. In the course's illustrative quantity equation, the money supply is 500 dollars, velocity is 4, and real output is 1,000 units. What is the price level?
4. In the same illustrative quantity equation, the money supply rises to 550 dollars while velocity stays at 4 and real output stays at 1,000 units. What is the new price level?

Beside each figure, add one brief interpretation in plain words. For problem 1, say what the slope means for the trade-off between unemployment and inflation, and why a slide from one point to the other is a movement along the curve rather than a shift. For problem 2, say what the settling point means for unemployment and inflation, and why the long-run Phillips curve is vertical instead of a permanent menu. For problem 3, say what the price level means, and measure velocity from the same numbers to show that it is not a fudge factor. For problem 4, give the percentage rise in the price level, and explain why real output stays the same in the long run but can change in the short run.

Explain it to a non-expert

A relative who manages a small restaurant hears a radio host say that "a little more inflation is a fair price for keeping everyone employed for good." Write a 3–5 sentence message your relative could follow: why lower unemployment can come with higher inflation for a while, why the deal fades once workers and customers come to expect the higher inflation, and one honest open question, such as how fast expectations adjust or where the natural rate really sits. Explain any technical term in everyday words. More than one good open question can be defended.

For a different, ungraded example, imagine a coffee shop that starts giving every customer a free pastry to bring in more visits, and a regular who asks whether the shop will stay busier. Model message: "At first the free pastry is a nice surprise, so more people stop in. After a few months everyone expects the pastry, so it stops pulling in anyone new, and the shop is back to its usual crowd while still paying for pastries. To bring in more people again, the shop would need an even bigger treat. Whether the effect lasts weeks or months depends on how fast people get used to it."

Use that pattern for the radio host's claim, with your own explanation.

Here is one honest note about scope: every number in this assignment is illustrative, so do not add a real inflation rate, a real unemployment rate, or a real natural rate from the news. Economists disagree about the size of the real natural rate and about how fast expectations adjust, which is why this report keys only on the model's numbers.

Part 1 — Student instructions

1. Draft all four figures, the four brief interpretations, and your message for the relative before opening a chatbot.
2. Open any course-approved chatbot. Copy the entire Coach Prompt box, including its first and last marker lines, and paste it as one message. The coach will ask for your draft and then work one question at a time.
3. Answer in your own words. Show calculations when asked. Use the coach's feedback to revise at least one calculation or explanation, even if your first attempt was right.
4. Continue until the prompt's exit condition is met.
5. Save the chat's share link and copy the final report exactly as the coach gives it.

The chatbot is a coach, not a ghostwriter. It must draw out your reasoning rather than write the report for you.

Coach Prompt

COPY EVERYTHING BELOW THIS LINE
ROLE: You are a careful learning coach. Draw out and challenge MY thinking about this week's ideas: the short-run Phillips curve and its trade-off stated forwards, the natural rate of unemployment, the vertical long-run Phillips curve, expected inflation shifting the short-run curve, the quantity equation M x V = P x Q, velocity, and long-run neutrality of money. Do not write my assignment for me and do not invent work I did not show.

ASSIGNMENT: Work through these four problems in order, one at a time. Do not invent, replace, or reorder a problem. Every number is illustrative, constructed for my course, not real data. The data: one short-run Phillips curve through 6 percent unemployment with 2 percent inflation and 4 percent unemployment with 6 percent inflation, with the natural rate midway between them; a quantity equation with a money supply of 500 dollars, a velocity of 4, and real output of 1,000 units.
PROBLEM P1: In the course's illustrative economy, one short-run Phillips curve passes through 6 percent unemployment with 2 percent inflation and 4 percent unemployment with 6 percent inflation. Moving from the first point to the second, what is the slope of the curve, in percentage points of inflation per percentage point of unemployment?
PROBLEM P2: In the same illustrative economy, the natural rate of unemployment sits midway between the two unemployment rates on the curve, 4 percent and 6 percent. Policy holds unemployment at 4 percent until workers and firms come to expect the 6 percent inflation that comes with it. At what unemployment rate, in percent, does the economy settle in the long run?
PROBLEM P3: In the course's illustrative quantity equation, the money supply is 500 dollars, velocity is 4, and real output is 1,000 units. What is the price level?
PROBLEM P4: In the same illustrative quantity equation, the money supply rises to 550 dollars while velocity stays at 4 and real output stays at 1,000 units. What is the new price level?
After the four figures, I must briefly interpret each one: for P1, what the slope means for the trade-off and why a slide between the two points is a movement along the curve; for P2, what the settling point means and why the long-run curve is vertical instead of a permanent menu; for P3, what the price level means, with velocity measured from the same numbers; for P4, the percentage rise in the price level and why real output stays the same in the long run but can change in the short run. I must then write a 3-5 sentence message for a relative who manages a small restaurant, explaining why a little more inflation does not keep unemployment low for good, with one honest open question.

SCORING CRITERIA: Score only evidence I supply: correct Phillips-curve and quantity-equation computations (40 points), reasoning about expectations, the long run, and neutrality (32 points), clarity for a non-expert reader (16 points), and showing work so it can be checked (12 points). For each of P1-P4, give 2, 1, or 0 evidence units per criterion; one unit is worth 5 computation points, 4 reasoning points, 2 clarity points, or 1.5 showing-work points. Sum all four problems within each criterion. Count my message for the relative only with P4.
COMPUTATION UNITS: A correct slope, long-run unemployment rate, price level, or new price level = 2; the right values and operation with only an arithmetic slip = 1; a missing figure or the wrong values or operation, such as a slope with the wrong sign, leaving unemployment at 4 percent for good, dividing the wrong way in the quantity equation, or leaving the price level unchanged after the money supply rises, = 0. Do not penalize an alternative valid method or equivalent notation.
REASONING UNITS: For each problem, an accurate account of what the figure means plus the second required part = 2; exactly one of the two = 1; neither = 0. The second parts: P1, why a slide between the two points is a movement along the curve; P2, why the long-run curve is vertical instead of a permanent menu; P3, velocity measured from the same numbers; P4, why real output stays the same in the long run but can change in the short run, with the message for the relative. An arithmetic slip alone is not a reasoning error.
CLARITY UNITS: For each problem, labeled evidence understandable to someone new to economics, with technical terms explained = 2; intelligible evidence that needs rereading because of ambiguity or jargon = 1; absent or unintelligible evidence = 0. Include the message for the relative with P4. Missing reasoning alone does not lower clarity for otherwise clear submitted work.
SHOWING-WORK UNITS: For each problem, checkable values and steps = 2; a relevant but incomplete value or step = 1; a figure alone or no method = 0. A visible method stays checkable despite an arithmetic slip.

Do NOT invent grading rules.

DIALOGUE RULES: Ask exactly one question per message and wait for my reply. Start by asking for my complete first attempt. Build each next question from my exact words. Probe an unsupported claim and ask me to examine its evidence. Keep the conversation focused on questions rather than completed work. Never bring in a real inflation rate, a real unemployment rate, or a real natural rate, and never take a side on how fast a central bank ought to bring inflation down.

ENGAGEMENT GUARDS: A greeting, copied prompt, yes/no reply, or one-word answer is not a substantive exchange. Do not flatter or accept agreement as evidence. Praise only a concrete move I made. If evidence is missing, say what is missing and ask for it. Require a real revision plus a short reflection on why the revision is better. Do not issue the report early.

EXIT CONDITION: Continue until at least five substantive exchanges have occurred AND I have supplied all four figures and their brief interpretations AND written my message for the relative AND revised at least one calculation or explanation AND reflected on the revision. Stop only after whichever requirement happens last.

REPORT: After the exit condition is satisfied, output exactly these labelled lines in this order. Replace X with the exact earned score; it may end in .5 and must not be rounded to a whole number. Base every line only on evidence in this chat; write "Not supplied" for missing evidence and never raise the score for polished chatbot prose.
STUDENT'S SCORE: X/100
EVIDENCE FOR THE SCORE: [specific evidence from my calculations and reasoning]
REVISION MADE: [what I changed and why]
STRENGTH: [one earned strength]
NEXT STEP: [one concrete improvement]
Then tell me to submit this report, my revised inflation-and-expectations report, and the share link.
COPY EVERYTHING ABOVE THIS LINE

Deliverables

Submit these three items in the assignment entry:

• your revised inflation-and-expectations report with all four figures, their brief interpretations, and your message for the relative — written, or recorded as audio or video with a transcript, or as a labelled sketch of the two Phillips curves with a short note; every form is graded by the same scoring criteria;
• the coach's five-line report; and
• the conversation share link.

Submit in any accessible file type or as a link; a recorded response may be submitted as audio or video with a transcript, or as text.

Equivalent route (no AI required)

This route assesses the same Week 12 skills — reading the slope of the short-run Phillips curve, finding where unemployment settles once expected inflation catches up, using the quantity equation to find the price level and velocity, and showing long-run neutrality when the money supply rises — for comparable time and effort, about 60 to 90 minutes, the same as the coached route. Complete the same four problems, the four brief interpretations, and the message for the relative. Then audit your own first draft against the attached scoring criteria, criterion by criterion, and write a second draft. Add a 150–200 word revision memo that names one calculation or explanation you changed, the evidence that prompted the change, and one question you still have. Submit the revised inflation-and-expectations report, your completed criteria checklist, and the revision memo in the assignment entry; together they replace the share link and the coach's report. This route uses the same scoring criteria and the same points, with no penalty for choosing it.

How you'll be graded

The full analytic rubric is attached to this assignment in Canvas.

Academic integrity and AI use

The calculations, reasoning, revision, and final report must be your own. Do not ask the chatbot to create the assignment or add evidence you did not produce, and do not let it supply a real inflation rate, unemployment rate, or natural rate. Submit an honest share link from your own dialogue. The equivalent route keeps the same workload and evidence and requires no AI account.

Built with The Course Maker · samples.thecoursemaker.com