Week 2 · Model Workshop

Week 2 Model Workshop: More Stuff, or Higher Prices?

Principles of Macroeconomics Free sample edition

Part 1 — The Big Picture

This week you learned that a rise in GDP can mean two different things: more goods and services, or the same goods and services at higher prices. In this workshop you build the GDP accounts of a small illustrative town yourself, in a spreadsheet or a graphing calculator, and pull those two stories apart. You compute nominal GDP and real GDP, build the GDP deflator, check that real growth and inflation multiply to nominal growth, sort a pair of statements into positive and normative, and then catch a chatbot when it mixes real and nominal or reaches past what the course has taught.

Time budget: Plan for about 90 minutes.

Part 2 — The Task

Guiding question: Did this town's economy produce more goods and services in year 2, or did its prices rise, and by how much of each?

Workshop data: An illustrative town's output of bread, bike repairs, and bus rides

Source: Quantities and prices of three goods in an illustrative town economy in a base year and in year 2, constructed for this workshop and printed in full in Part 4; it is not real data and describes no real place or person.

Rows: 3 goods (bread loaves, bike repairs, and bus rides), each with a quantity and a price in two years; the data table in Part 4 has 3 rows
Columns: good, base-year quantity, base-year price in dollars, year-2 quantity, and year-2 price in dollars
Prices: every price in year 2 is 5 percent above its base-year price

Part 3 — Materials & Procedure

Tools and materials

Desmos (free) or Google Sheets (free)
A document or notebook for your written answers

Ways of working

read-and-compute-from-macro-data
build-and-shift-the-ad-as-model
separate-positive-from-normative-claims

Procedure

Open a blank Google Sheet. In row 1 type the headers Good, Base quantity, Base price, Year-2 quantity, Year-2 price. In rows 2 to 4 type the three goods from the data table in Part 4: Bread, 200, 3, 240, 3.15; Repairs, 50, 20, 52, 21; Rides, 400, 2, 416, 2.10. If you prefer Desmos, open a new graph, add a table, and type the same numbers into five columns. Tool: Desmos (free) or Google Sheets (free). Check: Three rows of numbers sit under five headers, and every year-2 price is a little higher than its base-year price.
Value each good three ways. In cell F2 type =B2*C2 (base-year value), in cell G2 type =D2*E2 (year-2 value at year-2 prices), and in cell H2 type =D2*C2 (year-2 value at base-year prices). Copy cells F2:H2 down through row 4. In Desmos, type a line such as 240*3.15 for each good and price pair instead. Tool: Desmos (free) or Google Sheets (free). Check: Each good now has three dollar values, and for every good the value at base-year prices sits between the other two values.
Total the three columns. In cell F5 type =SUM(F2:F4) for base-year GDP, in cell G5 type =SUM(G2:G4) for year-2 nominal GDP, and in cell H5 type =SUM(H2:H4) for year-2 real GDP. Copy the three totals into the second scaffold table. Tool: Desmos (free) or Google Sheets (free). Check: Year-2 nominal GDP is the largest of the three totals and base-year GDP the smallest.
Build the GDP deflator. In cell F7 type =G5/H5*100. Then compute the base-year deflator by hand: base-year GDP divided by itself, times 100. Tool: Desmos (free) or Google Sheets (free). Check: The year-2 deflator is above 100 because every price rose, and the base-year deflator is exactly 100.
Compute both growth rates from the starting value. In cell F8 type =(H5-F5)/F5*100 for real growth and in cell F9 type =(G5-F5)/F5*100 for nominal growth. Record both in the third scaffold table. Tool: Desmos (free) or Google Sheets (free). Check: Nominal growth is larger than real growth, and the gap between them comes from the price rise.
Run the growth check. In cell F10 type =(1+F8/100)*(F7/100) and compare it with =1+F9/100 in cell F11. In Desmos, type the same two expressions using your own numbers. Tool: Desmos (free) or Google Sheets (free). Check: The two cells show the same number, so real growth and inflation multiply to nominal growth.

Fallback route

When to use it: Use this route if no spreadsheet or graphing calculator is available or a formula will not work.

Work every step by hand or with any calculator from the data table in Part 4. Multiply each quantity by the right price, add the three goods, divide for the deflator and the growth rates, and multiply for the growth check, writing each step on its own line. Complete all three scaffold tables and answer every analysis question and the critique step; submit the same items for equal credit.

This route earns the same credit as the primary route.

Part 4 — The Scaffold

This is the town's data; copy it into your sheet exactly, because every later number is built from it, and fill in the last column to see how much each price changed.

Student scaffold table 1
Good	Base-year quantity	Base-year price (dollars)	Year-2 quantity	Year-2 price (dollars)
Bread loaves	200	3.00	240	3.15
Bike repairs	50	20.00	52	21.00
Bus rides	400	2.00	416	2.10

Record each good's three values and the totals, so the difference between nominal and real GDP is visible good by good.

Student scaffold table 2
Good	Base-year value	Year-2 value at year-2 prices	Year-2 value at base-year prices
Bread loaves
Bike repairs
Bus rides
Total (GDP)

Record the deflator, the two growth rates, and the growth check, so you can split the change into more output and higher prices.

Student scaffold table 3
Measure	Formula you used	Your result
Year-2 GDP deflator
Base-year GDP deflator
Real growth (percent)
Nominal growth (percent)
Growth check: left side and right side

Part 5 — Analysis Questions

Using your second table, show the arithmetic for base-year GDP, year-2 nominal GDP, and year-2 real GDP, one good at a time, and say in one sentence what each total measures.
Show the division that gives the year-2 GDP deflator, then show both growth rates divided by the starting value. Write the growth check with your own numbers and say whether the two sides agree.
In two or three sentences, explain to someone who has never studied economics why the town's nominal GDP grew faster than its output, and which of your numbers tells how much more bread, repairs, and rides the town made.
Label each statement positive or normative and give the reason: (i) the town produced more bike repairs in year 2 than in the base year; (ii) the town should spend less on bus rides and more on bike repairs; (iii) every price in the town rose 5 percent. For each positive statement, name the column of your table that checks it.
Choose one and answer it in 3–4 sentences. (a) Name one thing that would make life in this town better or worse that its GDP would not capture, and say why the GDP definition leaves it out. (b) This deflator is built from only three goods; explain why a price index built from a different set of goods could tell a different story about prices.

Part 6 — AI-Critique Moment

Choose one equal-credit critique route. Route A: ask an approved AI tool to critique your completed work, then check its response against your own evidence. Route B is the no-AI equivalent printed below.

Approved tools: Claude, Gemini, ChatGPT, Grok, Microsoft Copilot.

Prompt to paste:

I've pasted my completed Week 2 Model Workshop tables above. They describe an illustrative town that produces only bread loaves, bike repairs, and bus rides. In the base year it made 200 loaves at 3 dollars each, 50 bike repairs at 20 dollars each, and 400 bus rides at 2 dollars each. In year 2 it made 240 loaves at 3.15 dollars, 52 repairs at 21 dollars, and 416 rides at 2.10 dollars. Please do four things. First, by what percent did this town's output of goods and services grow from the base year to year 2? Show your steps. Second, label each of these statements positive or normative, and say why: (1) year-2 prices in the town were higher than base-year prices; (2) the town ought to aim for faster growth next year. Third, as a stretch question for later in the course, if the overall price level across a whole economy rose, would that shift the aggregate demand curve? Fourth, also a stretch question, if a government spent 20 more on new roads and households spend 0.8 of each extra dollar of income, by how much could total output rise?

Test the response for these likely failures:

Chatbots often add up year-2 quantities times year-2 prices, compare that dollar total with the base year, and report the result as output growth, which mixes the 5 percent rise in every price into the growth of output.
Chatbots sometimes call the growth-target statement positive because it mentions growth, or call the price statement normative because rising prices sound bad.
Chatbots often say a higher price level shifts aggregate demand to the left.
Chatbots sometimes reach for a banking formula such as 1 ⁄ RR, or compute 1 ⁄ 0.8, when the question is about extra government spending.

Write 3–5 sentences naming one thing the chatbot got right and at least two places it went wrong or overreached, quoting its words and correcting each with evidence from your own tables or the course's definitions; for the two stretch questions, say what the course will check later.

Equivalent route (no AI required)

No AI account is required for this workshop. Instead of the chatbot, critique this flawed analysis, printed here in full: "The town's GDP went from 2,400 dollars to 2,721.60 dollars, so its output grew 13.4 percent. Year-2 prices were higher than base-year prices, which is a normative statement because higher prices are bad for shoppers. The claim that the town ought to aim for faster growth is positive, because growth can be measured. If the price level across a whole economy rose, the aggregate demand curve would shift to the left. If a government spent 20 more on roads and households spend 0.8 of each extra dollar, output would rise by 20 ⁄ 0.8 = 25." Mark it up: quote each flawed sentence, name what is wrong (nominal growth read as output growth, a positive statement called normative or the reverse, a movement along a curve called a shift, or the wrong multiplier), cite the evidence from your tables or the course's definitions, and write a corrected sentence beneath it; for the last two sentences, say what the course will check later. This route assesses the same objective (Objective 2 — measure an economy's output with gross domestic product by the expenditure approach (C + I + G + NX), decide what counts and what does not, distinguish real from nominal GDP, and compute and interpret the GDP deflator) as the chatbot critique, takes comparable effort (about 30 minutes and 200–300 words), is scored by the same scoring criteria for the same credit, and its own submission artifact is the marked-up flawed analysis, posted in place of the chatbot share link and report.

Part 7 — What to Submit

All three completed scaffold tables, with the formulas or hand steps you used
Written answers to all five analysis questions
The chatbot critique report with its share link, or the equivalent route's marked-up flawed analysis

Deliverable:

A short Model Workshop report on the illustrative town: three completed tables (the data, each good valued three ways with the GDP totals, and the deflator, growth rates, and growth check), written answers to five analysis questions, and a critique of a chatbot's answer to the same questions, or, on the equivalent route, a marked-up correction of the printed flawed analysis. 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. Choose a written, recorded, or visual form for your answers; every form is graded by the same scoring criteria.

Rubric

The rubric below shows how each submitted part is evaluated; bands are full, partial, or none.

Workshop evaluation criteria
Criterion	Full	Partial	None
Building the GDP accounts	Each good is valued three ways from the Part 4 data, and base-year GDP, year-2 nominal GDP, and year-2 real GDP are all totalled with the steps shown.	The table is built, but one value or total is missing or wrong, or one column uses the wrong year's prices.	No values are computed, or the values are invented rather than built from the data.
Deflator, growth rates, and the growth check	The deflator divides nominal by real GDP and multiplies by 100, both growth rates divide the change by the base-year value, and the growth check is written with the student's own numbers and agrees.	Some of these are correct, but one is missing, flipped, or divided by the wrong base.	None of the deflator, growth rates, or growth check is attempted.
Interpreting output versus prices	Question 3 explains in plain words why nominal GDP grew faster than output and names real growth as the measure of more goods and services.	The explanation is present but treats nominal growth as output growth in places, or uses jargon without explaining it.	No interpretation is given, or nominal growth is presented as the growth of output.
Separating positive from normative	All three statements in question 4 are labelled correctly with a reason, and each positive statement is tied to the table column that checks it.	Two statements are labelled correctly, or the labels are right but the reasons are missing.	The statements are not labelled, or fewer than two are labelled correctly.
Critique of the chatbot or of the printed flawed analysis	On either route, at least two errors are quoted and corrected with evidence from the student's own tables or the course's definitions, the two stretch questions are flagged as later material, and one correct point is acknowledged; both routes earn this band equally.	On either route, errors are named but corrected without evidence, or only one error is caught.	No critique appears, or pasted output is submitted without any checking.
Reflection on what the measures leave out	The chosen reflection option is answered in 3–4 sentences that tie a specific gap to the GDP definition or to how the deflator was built.	The reflection is answered but stays general or does not connect to the definition or the three goods.	No reflection is submitted.

Quality Gate

Every value in the tables comes from your own formulas or hand steps on the Part 4 data, never from memory or a chatbot.
Nominal GDP uses year-2 prices, real GDP uses base-year prices, and the two are never swapped.
The deflator puts nominal GDP on top, and the base-year deflator is exactly 100.
Both growth rates divide the change by the base-year value, and the growth check agrees for your own numbers.
Each statement in question 4 is labelled positive or normative with a reason.
No statistic, figure, or source is invented anywhere in the submission, and the town's numbers are described as illustrative.
The critique quotes the chatbot or the flawed analysis and corrects at least two errors with evidence.

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