Course: Principles of Macroeconomics (ECON 2) · Silver Oak University (fictional sample) · Prof. Ashford
Focus: Inflation, the Phillips Curve & Expectations · Objective 8 · SLO A & B

📋 Module Overview Page — "Start Here" (Canvas: Page, published)

Week 12 — The Phillips Curve, the Quantity Theory & Why "More Inflation for Less Unemployment" Isn't a Long-Run Menu

Every few years, someone proposes that a little more inflation could buy us a little less unemployment — permanently. This week you'll build the tools to evaluate that claim properly: the Phillips curve, which really does show a short-run trade-off, and the quantity theory of money (MV = PQ), which shows why that trade-off disappears once expectations catch up. By Friday you'll be able to explain why the short run and the long run tell two different stories about inflation and unemployment — and why confusing the two is one of the most consequential mistakes in macroeconomics.

The big question: Is there really a trade-off between inflation and unemployment — and if so, does it last?

By the end of this week, you can:

• read the short-run Phillips curve (SRPC) — a downward-sloping trade-off between the unemployment rate and the inflation rate — and locate two specific points on it;
• explain why the long-run Phillips curve (LRPC) is vertical at the natural rate of unemployment, and why expected inflation shifts the SRPC up or down;
• name THE CLASSIC ERROR: treating the short-run tradeoff as if it were a permanent, exploitable long-run menu — and explain why it isn't;
• apply the quantity theory of money (MV = PQ) to compute the price level and show long-run monetary neutrality — a change in the money supply eventually changes prices, not real output;
• use the approximation that inflation ≈ money growth − output growth, labeling it clearly as an approximation, not an exact law;
• sort claims about the inflation–unemployment trade-off into positive (what the model predicts) and normative (which cost society should prefer) — and explain, evenhandedly, the case each side makes for "which way policy should err."

Do this, in order:

1. Read & watch — the Week 12 resources (≈35 min). → Readings & Resources page
2. Lecture Tutorial — work through the Phillips curve and MV = PQ with your AI tutor (≈45 min). Due Sun, Nov 22. → submit the chat share link + summary
3. Practice Exercises — 6 quick reps, ungraded (≈15 min).
4. Quiz 12 — 10 questions, closed to AI (≈20 min). Due Sun, Nov 22.
5. Discussion 12 — "If Policy Must Err, Which Way — a Bit More Inflation or a Bit More Unemployment?" Initial post Fri, Nov 20, replies Sun, Nov 22.
6. Assignment 12 — the Phillips-curve & quantity-theory problem set (100 pts). Due Sun, Nov 22.
7. Workshop 12 — Graph & Model Workshop — "MV = PQ & the Phillips Curve": build the quantity-theory table and plot the SRPC/LRPC in Desmos (50 pts). Due Sun, Nov 22.

A note before you start: this week's models are small but the stakes are big — an entire era of monetary-policy history turns on the distinction between the short-run Phillips curve and the long-run vertical one. Watch closely for THE CLASSIC ERROR: it is the single most common way this material gets misused in the real world. You've got this. 💪

📣 Welcome Announcement (Canvas: Announcement; available_from_offset_days = 0 — posts Mon, Nov 16)

Subject: Week 12 — a trade-off that isn't what it looks like 👋

Hi everyone,

Quick thought experiment to start the week: if the Fed could permanently trade 1% more inflation for 1% less unemployment, would that be a good deal? Plenty of policymakers have asked exactly that question — and for a while in the mid-20th century, the data seemed to say yes. This week you'll find out why that "deal" evaporates once people catch on.

This week, don't miss:

• The short-run Phillips curve — a real, downward-sloping trade-off between unemployment and inflation, named after the economist A. W. Phillips, who documented the historical pattern.
• The long-run Phillips curve — perfectly vertical at the economy's natural rate. This is the idea most associated with Milton Friedman, who argued the short-run trade-off vanishes once expected inflation adjusts — the natural-rate idea.
• THE CLASSIC ERROR — treating the short-run tradeoff as a permanent long-run menu. Watch for it; it's this week's single most important trap.
• The quantity theory of money (MV = PQ) — a compact equation connecting the money supply directly to the price level, and the source of long-run monetary neutrality.

Start with the Module Overview ("Start Here"), then the readings, then your AI Lecture Tutorial. Bring a question to class — the best ones usually come from the boundary between "short run" and "long run."

See you in class,
Prof. Ashford