Week 12 Discussion — How Fast to Bring Inflation Down? — Traditional alternative (no AI)

Instructors: publish this instead of the adaptive version if you prefer, and unpublish or delete the adaptive one.

Hook

In this week's illustrative economy, holding unemployment at 4% buys 6% inflation on the short-run Phillips curve. Once people come to expect 6%, the short-run curve shifts up and the economy settles back at the natural rate of 5% unemployment, with inflation still at 6%. Economists agree that the long-run curve is vertical, so the trade-off does not last. They still disagree about how costly it is to get inflation back down, and about how hard to lean on a natural rate nobody can see directly.

Your discussion question — choose Option A or Option B; they carry the same weight and the same rubric, and you say which you picked.

Option A: Inflation has settled at 6%, well above what households and firms had planned for, and everyone now expects it to stay there. Should the central bank bring inflation down gradually, over several years, or quickly, with a sharp slowdown in money growth? Take a position, support it with this week's ideas (the short-run Phillips curve, expected inflation, the natural rate, and the quantity equation), and label which part of your claim is positive (testable against evidence) and which part is normative (a judgment about what ought to happen).

Option B: The natural rate of unemployment cannot be seen directly, and economists disagree about its size. When unemployment is low and inflation is starting to climb, should a central bank lean toward letting the job market run hot in case the natural rate is lower than it thinks, or lean toward acting early to keep expected inflation from rising? Take a position, trace what the short-run and long-run Phillips curves predict for each choice, say what the simple model leaves out, and present the strongest case for the other choice.

There is no single right answer. The Keynesian case for a gradual, job-protecting path and the classical and monetarist case for a firm, believable commitment can each be argued well. Your job is to take a position, support it with this week's tools, and keep what the model predicts (positive) separate from what you think ought to be done (normative). Pick the option you actually care about, and tell us your reasoning.

Expectations

Activity format: one initial post followed by two substantive peer replies. Plan on about 45 minutes across the two deadlines; your instructor sets both due dates in Canvas.

Your initial post — by the first due date (early in the module week):

• Say which option you chose.
• For Option A, state in one clear sentence whether the central bank should bring inflation down gradually or quickly; for Option B, state whether it should let the job market run or act early.
• Use at least two of this week's terms (short-run Phillips curve, long-run Phillips curve, natural rate of unemployment, natural-rate argument, inflation–unemployment trade-off, quantity equation, velocity of money, long-run neutrality of money, money growth rate) correctly.
• Give your reason, trace what the short-run and long-run curves predict where it fits, and label which sentences are positive and which are normative.
• Length: roughly 150–250 words if written. You may instead record your post as audio or video (about two minutes) and attach a transcript; both forms are scored by the same rubric.

Your replies — by the second due date (the end of the module week):

• Reply substantively to at least two classmates.
• A substantive reply does more than agree: make the strongest case for the side the poster set aside, check whether the poster stated the trade-off backwards or gave the long-run curve a slope, or point out a normative claim presented as if it were positive. "Nice point!" on its own does not count.

What a strong post looks like:

I chose Option A, and I lean toward a gradual path. Positive claim: this week's model says that once 6% inflation is expected, the short-run curve has shifted up, so pushing inflation down quickly means sliding along that higher curve toward more unemployment until expectations fall. Normative claim: I weigh the paychecks lost in a sharp slowdown heavily. The strongest objection is that a slow path can let 6% settle into wages for years. I partly agree, so I would want the plan announced plainly enough that expectations start falling early.

Notice how it names the choice, uses both curves and expected inflation, labels the positive and the normative claims, and answers an objection. That is the bar.

Participation rubric

This discussion is worth 10 points. The three criteria below look at your initial post and your peer replies.

Post early if you can — the best threads happen when people have time to reply before the second due date.

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