Week 11 — Assignment (Adaptive Learning) · The Monetary-Transmission-Mechanism Problem Set

Course: Principles of Macroeconomics (ECON 2) · Silver Oak University (fictional sample) · Prof. Ashford
Objective 7 · SLO A & B · Assignment 11 of 14 · 100 points
This is the configured (adaptive) variant. An AI coach gives you the problems one at a time, grades each against an embedded rubric, lets you retry a fresh version, and produces a self-scored report. You submit the report (first line STUDENT'S SCORE: X/100) + your chat share link. (The traditional, instructor-graded version is in I-assignment-and-rubric-week-11-traditional.md.)

How to run this

1. Open an approved chatbot (Gemini, Claude, ChatGPT). Copy the whole gray box and paste it as one message.
2. Solve each problem; the coach grades it, teaches the gaps, and offers a fresh variant to raise your score.
3. When you get the report, submit it (it starts with STUDENT'S SCORE: X/100) plus your chat share link in Canvas. Due Sun, Nov 15.

You are my assignment coach and grader for Week 11 of Principles of Macroeconomics (ECON 2)
at Silver Oak University. Give me the problems below ONE AT A TIME, let me solve each, grade
my answer against the rubric, show me how to improve, and let me re-try a fresh version to
raise my score. Grade ONLY against the answer key and rubric below — never invent problems,
answers, or scores. Redo any arithmetic yourself and SHOW YOUR WORK before telling me I'm
wrong. Score honestly; a wrong answer scores low, a strong answer earns full marks.

HARD RULES (never break these): (1) never invent or misattribute a quotation, study,
statistic, or real-world data figure — you may name Friedman's "long and variable lags"
critique as an idea associated with the monetarist tradition, but never construct or
attribute a specific quoted sentence to him or any other economist; (2) never take a
partisan side on any contested question — present reasoning fairly and never declare one
school of thought or economic priority objectively "correct."

START: greet me in 1-2 sentences, ask my FIRST NAME, then give Problem 1 exactly as written.
If I answer without giving my name, keep going but ask before the final report. ONE problem
at a time; never show the whole set, the answers, the variants, or the rubric. After each
answer: grade it, say what I did well, TEACH the gap, then offer a re-attempt on the FRESH
VARIANT (update my score to my BEST attempt, capped at full marks). Judge meaning, not
wording. Every message ends with a problem, a question, or a next step.

================= PROBLEM 1 (25 pts) — Trace the expansionary chain =================
PROBLEM: "The money supply is $600 billion and the interest rate is 6%. The Fed buys bonds,
raising the money supply to $700 billion, which lowers the interest rate to 5%. Investment
rises $20 billion for every 1-point drop in the interest rate, and the spending multiplier
is 5. (a) What is the change in investment (ΔI)? (b) What is the total change in real GDP
(ΔY)? (c) Which direction does aggregate demand shift? (d) Walking along a fixed SRAS curve,
what happens to the price level and real output?"
VETTED ANSWER: (a) A 1-point drop → ΔI = +$20 billion. (b) ΔY = ΔI × multiplier = $20B × 5 =
+$100 billion. (c) AD shifts RIGHT. (d) The price level RISES (P↑) and real output RISES
(Y↑) together, walking up the fixed SRAS curve.
RUBRIC: 25 = all four parts correct with the arithmetic shown. 15-20 = three parts correct,
one arithmetic slip or a vague P/Y statement. 8-14 = uses the wrong multiplier (e.g., 1/RR)
or gets AD's direction right but misses the P/Y read. 0-7 = mostly wrong or skips the
interest-rate/investment links entirely.
FRESH VARIANT: "The money supply is $500 billion and the interest rate is 8%. The Fed buys
bonds, raising the money supply to $600 billion, which lowers the interest rate to 6%
(a 2-point drop). Investment rises $20 billion for every 1-point drop, and the multiplier is
5. Same four questions." ANSWER: (a) ΔI = 2 × $20B = +$40 billion. (b) ΔY = $40B × 5 = +$200
billion. (c) AD shifts RIGHT. (d) P↑, Y↑ together.

================= PROBLEM 2 (25 pts) — Reverse it: the contractionary chain ================
PROBLEM: "Same starting point: money supply $600 billion, interest rate 6%. This time the
Fed SELLS bonds, LOWERING the money supply to $500 billion, which RAISES the interest rate
to 7%. Using the same $20-billion-per-point rule and multiplier of 5: (a) What is the change
in investment (ΔI)? (b) What is the total change in real GDP (ΔY)? (c) Which direction does
aggregate demand shift? (d) What happens to the price level and real output?"
VETTED ANSWER: (a) A 1-point RISE → ΔI = −$20 billion (investment FALLS, because the rate
rose). (b) ΔY = −$20B × 5 = −$100 billion. (c) AD shifts LEFT. (d) The price level FALLS
(P↓) and real output FALLS (Y↓) together, walking down the fixed SRAS curve.
RUBRIC: 25 = all four parts correctly reversed (every arrow flipped, not just the P/Y
ending) with arithmetic shown. 15-20 = gets the final ΔY sign right but states one earlier
link (e.g., the interest-rate direction or ΔI's sign) incorrectly or ambiguously. 8-14 =
flips only the P/Y outcome while leaving an earlier link pointed the wrong direction. 0-7 =
treats this as another expansionary case (says I rises, AD shifts right).
FRESH VARIANT: "Same starting point, but the Fed sells enough bonds to raise the rate from
6% to 9% (a 3-point rise). Same rules. Same four questions." ANSWER: (a) ΔI = 3 × (−$20B) =
−$60 billion. (b) ΔY = −$60B × 5 = −$300 billion. (c) AD shifts LEFT. (d) P↓, Y↓ together.

================= PROBLEM 3 (25 pts) — Described-graph comparative statics + a wrinkle ======
PROBLEM: "An economy starts with the Fed lowering the interest rate, which raises
investment and shifts AD right, raising both the price level and real output — the standard
chain. Now suppose that, this time, many banks respond to the Fed's bond purchase by holding
a large share of their new reserves as EXCESS reserves rather than lending them out. (a) In
plain language, which specific LINK of the transmission chain does this weaken? (b) Does the
DIRECTION of the outcome (AD still shifts right; P and Y still both rise) change, or just the
SIZE of the effect? Explain. (c) Is this bank behavior a reason to conclude the
transmission-mechanism MODEL is wrong, or a real-world qualification on it? Explain briefly."
VETTED ANSWER: (a) It weakens LINK 3 — the investment response — because new reserves that
sit idle as excess reserves never reach borrowers as new loans, so the interest-rate change
does not translate into as much new investment spending as the clean $20B-per-point rule
assumes. (b) The DIRECTION does not change — AD still shifts right, and P and Y still both
rise — but the SIZE of ΔI (and therefore ΔY) would likely come in SMALLER than the model's
clean prediction, because less new money is actually being spent. (c) It is a real-world
QUALIFICATION, not evidence the model is wrong — the model still correctly identifies which
direction things move; it's simply an honest caveat about the MAGNITUDE when a link in the
chain doesn't operate at full strength.
RUBRIC: 25 = all three parts correct, correctly identifying Link 3, correctly stating
direction unchanged but size reduced, and correctly framing this as a qualification not a
model failure. 15-20 = (a) and (b) correct, (c) vague or overstates the caveat as
"disproving" the model. 8-14 = identifies the general idea (banks not lending) but
misidentifies which link weakens, or wrongly claims the DIRECTION of the outcome reverses.
0-7 = doesn't engage the chain-link structure at all.
FRESH VARIANT: "Same setup, but this time suppose firms become unusually pessimistic about
the future right when the Fed lowers rates, so they are reluctant to expand investment even
though borrowing is cheaper. (a) Which link weakens? (b) Does the direction change, or just
the size? (c) Qualification or model failure?" ANSWER: (a) Link 3 again (the investment
response) weakens — pessimism blunts how much investment actually responds to a given rate
drop. (b) Direction unchanged (AD still shifts right, P and Y still both rise); size likely
smaller. (c) A real-world qualification, not a model failure — the SAME reasoning as
expectations affecting how strongly a mechanically correct chain plays out.

================= PROBLEM 4 (25 pts) — Fine-tuning vs. blunt instrument, evenhandedly ======
PROBLEM: "In 4-6 sentences: (a) name and briefly explain the case FOR treating monetary
policy as a useful 'fine-tuning' tool (which school of thought is this associated with, and
what's the core argument?); (b) name and briefly explain the case FOR skepticism / rules
over discretion (which school of thought, and what's the core argument, including the 'long
and variable lags' idea); (c) explain, in one sentence, what BOTH sides actually agree on
(hint: it's not a disagreement about the mechanical chain itself)."
VETTED ANSWER: (a) The FINE-TUNING case is associated with the KEYNESIAN tradition: the Fed
has real, usable tools (open-market operations, the discount rate, reserve requirements) and
enough information to actively lean against recessions and overheating as they emerge — an
imperfect, timely nudge is better than doing nothing while a downturn deepens. (b) The
SKEPTICAL / RULES-OVER-DISCRETION case is associated with the MONETARIST/CLASSICAL
tradition, and includes Milton Friedman's "long and variable lags" critique (named
factually, no invented quotation): because the inside lag (recognizing a problem) and
outside lag (the policy actually working through the economy) are unpredictable in length,
policymakers risk fixing yesterday's problem after today's has already changed — a mistimed
nudge can ADD instability rather than remove it, favoring simple, predictable rules instead.
(c) BOTH sides accept the SAME mechanical transmission chain (MS → r → I → AD → P/Y) — the
disagreement is entirely about how RELIABLY and how QUICKLY that chain operates in practice,
not about whether it exists.
RUBRIC: 25 = both cases correctly named to their traditions and explained at full strength,
plus the shared-agreement point stated correctly, with NO verdict declared. 15-20 = both
cases present but one is thin, underdeveloped, or the shared-agreement point is missing.
8-14 = only one side presented, or a side is unfairly weakened/strawmanned. 0-7 = declares
one school "correct" or fails to engage the actual economic content.
FRESH VARIANT: "Same three-part structure, but frame it around a hypothetical Fed decision
to raise interest rates sharply to fight rising inflation: (a) the case FOR treating this as
a defensible fine-tuning move; (b) the case FOR worrying this could overshoot and cause an
unnecessary downturn given lags; (c) what both sides agree on." ANSWER: (a) Keynesian-style
case: the Fed can and should act decisively against a real, measurable inflation problem
using its tools. (b) Monetarist-style case: because effects arrive with a long, variable
lag, a sharp rate hike risks still being 'in the pipeline' tightening the economy well after
inflation has already cooled on its own, causing an avoidable downturn. (c) Both agree on
the same transmission chain (MS/rates → I → AD → P/Y); they disagree on timing reliability.

================= COMPLETION =================
After all four problems (and any re-attempts), produce EXACTLY:
    STUDENT'S SCORE: X/100
    WEEK 11 ASSIGNMENT — The Monetary-Transmission-Mechanism Problem Set
    Student: [name] | Date: ___
    Problem 1: a/25 — [one-line note]
    Problem 2: b/25 — [one-line note]
    Problem 3: c/25 — [one-line note]
    Problem 4: d/25 — [one-line note]
    Strongest skill: ___
    Worth another look: ___
Then say, verbatim: "Copy this entire report AND your share link to this chat, and submit both
in Canvas for this assignment." End with one genuine sentence of encouragement.

Instructor grading note + rubric (for Canvas)

Record the AI score (line 1); spot-check a sample against the chat share link. The embedded key makes scores consistent across chatbots. Summary rubric (each problem to 25, total 100):

Quantitative gate: PASS — every number pre-computed/re-verified: P1 ΔI=+$20B, ΔY=+$100B (variant ΔI=+$40B, ΔY=+$200B); P2 ΔI=−$20B, ΔY=−$100B (variant ΔI=−$60B, ΔY=−$300B); P3 no new arithmetic, direction-vs-size reasoning only; P4 no arithmetic, evenhandedness content only.
Graph-logic check: PASS — every transmission-chain/curve-shift claim verified: expansionary AD right, P↑/Y↑ walking up fixed SRAS; contractionary AD left, P↓/Y↓ walking down fixed SRAS, EVERY link reversed (not just the P/Y ending) in both P2 items; P3 correctly identifies Link 3 (investment response) as the one that weakens, direction unchanged/size reduced; correct multiplier (spending, 1/(1−MPC) = 5) used throughout, never the money multiplier (1/RR).

Canvas placement block

canvas_object    = Assignment
title            = "Week 11 Assignment — The Monetary-Transmission-Mechanism Problem Set (adaptive)"
assignment_group = "Assignments"
points_possible  = 100
grading_type     = points
submission_types = [online_text_entry, online_url]
due_offset_days  = 6
published        = true
submission_note  = "Paste the AI summary report (score on line 1) + the chat share link."
provenance       = "~ Prof. Ashford's edition · Fall 2026 · built with thecoursemaker.com"

Traditional variant — for comparison. This course is configured adaptive learning, so the actual Week-11 assignment is the AI-coached version in I-assignment-and-rubric-week-11.md. This file shows the same problem set built the traditional way — students complete it and submit; the instructor grades against the rubric. (Choosing assignment_type = traditional at setup generates this style.)

Course: Principles of Macroeconomics (ECON 2) · Silver Oak University (fictional sample) · Prof. Ashford
Objective 7 · SLO A & B · Assignment 11 of 14 · 100 points · Due Sun, Nov 15

The Assignment

Show your work and write your interpretations in complete sentences. Submit as a document or text entry.

Problem 1 — Trace the expansionary chain (25 pts). The money supply is $600 billion and the interest rate is 6%. The Fed buys bonds, raising the money supply to $700 billion, which lowers the interest rate to 5%. Investment rises $20 billion for every 1-point drop in the interest rate, and the spending multiplier is 5.
(a) What is the change in investment (ΔI)?
(b) What is the total change in real GDP (ΔY)?
(c) Which direction does aggregate demand shift?
(d) Walking along a fixed SRAS curve, what happens to the price level and real output?

Problem 2 — Reverse it: the contractionary chain (25 pts). Same starting point: money supply $600 billion, interest rate 6%. This time the Fed sells bonds, lowering the money supply to $500 billion, which raises the interest rate to 7%. Using the same $20-billion-per-point rule and multiplier of 5:
(a) What is the change in investment (ΔI)?
(b) What is the total change in real GDP (ΔY)?
(c) Which direction does aggregate demand shift?
(d) What happens to the price level and real output?

Problem 3 — Described-graph comparative statics with a wrinkle (25 pts). An economy starts with the Fed lowering the interest rate, which raises investment and shifts AD right, raising both the price level and real output — the standard chain. Now suppose that, this time, many banks respond to the Fed's bond purchase by holding a large share of their new reserves as excess reserves rather than lending them out.
(a) In plain language, which specific link of the transmission chain does this weaken?
(b) Does the direction of the outcome (AD still shifts right; P and Y still both rise) change, or just the size of the effect? Explain.
(c) Is this bank behavior a reason to conclude the transmission-mechanism model is wrong, or a real-world qualification on it? Explain briefly.

Problem 4 — Fine-tuning vs. blunt instrument, evenhandedly (25 pts). In 4–6 sentences:
(a) Name and briefly explain the case for treating monetary policy as a useful "fine-tuning" tool (which school of thought, and what's the core argument?).
(b) Name and briefly explain the case for skepticism / rules over discretion (which school of thought, and what's the core argument, including the "long and variable lags" idea)?
(c) In one sentence, what do both sides actually agree on?

AI note. This is the traditional format — submit your own work. You may use an approved chatbot to check a definition, but add a one-line note of which tool and how. (In the adaptive version, working the problems with the chatbot is the activity.)

Grading rubric — 100 points

Instructor answer key & worked solutions — REMOVE BEFORE PUBLISHING TO STUDENTS

• P1: (a) A 1-point drop → ΔI = +$20 billion. (b) ΔY = ΔI × multiplier = $20B × 5 = +$100 billion. (c) AD shifts RIGHT. (d) Walking up the fixed SRAS curve: the price level RISES (P↑) and real output RISES (Y↑) together. (Numbers pre-computed/verified.)
• P2: (a) A 1-point RISE → ΔI = −$20 billion (investment falls). (b) ΔY = −$20B × 5 = −$100 billion. (c) AD shifts LEFT. (d) Walking down the fixed SRAS curve: the price level FALLS (P↓) and real output FALLS (Y↓) together. Every arrow reversed from P1 — not just the P/Y ending. (Verified.)
• P3: (a) It weakens Link 3 — the investment response — new reserves held as excess reserves never reach borrowers as new loans, so the interest-rate change doesn't translate into as much new investment spending as the clean $20B-per-point rule assumes. (b) The direction does not change — AD still shifts right, P and Y still both rise — but the size of ΔI (and therefore ΔY) would likely come in smaller, because less new money is actually being spent. (c) A real-world qualification, not evidence the model is wrong — the model still correctly identifies which direction things move; this is an honest caveat about magnitude when a link doesn't operate at full strength. (Curve-shift direction verified.)
• P4: (a) The fine-tuning case is associated with the Keynesian tradition: the Fed has real, usable tools and enough information to actively lean against recessions and overheating as they emerge — an imperfect, timely nudge beats doing nothing while a downturn deepens. (b) The skeptical / rules-over-discretion case is associated with the monetarist/classical tradition, including Milton Friedman's "long and variable lags" critique (named factually, no invented quotation): because inside and outside lags are unpredictable in length, policymakers risk fixing yesterday's problem after today's has already changed — a mistimed nudge can add instability rather than remove it, favoring simple, predictable rules instead. (c) Both sides accept the same mechanical transmission chain (MS → r → I → AD → P/Y) — the disagreement is entirely about how reliably and quickly that chain operates in practice, not about whether it exists. Full credit requires presenting both cases at full strength with no declared winner.

Quantitative gate: PASS — all numbers re-computed in Python (ΔI ±$20B; ΔY ±$100B; both directions checked).
Graph-logic check: PASS — every curve-shift/chain-link claim verified (expansionary: AD right, P↑/Y↑; contractionary: AD left, P↓/Y↓, every link reversed not just the ending; P3 direction unchanged/size reduced when Link 3 weakens; correct multiplier — spending, not money — used throughout).

Quality gate (self-checked): distractors/traps named: using the money multiplier (1/RR) instead of the spending multiplier, skipping the interest-rate/investment links, only half-reversing the contractionary chain, declaring one school of thought objectively correct.

Canvas placement block

canvas_object    = Assignment
title            = "Week 11 Assignment — The Monetary-Transmission-Mechanism Problem Set (traditional)"
assignment_group = "Assignments"
points_possible  = 100
grading_type     = points
submission_types = [online_upload, online_text_entry]
due_offset_days  = 6
rubric_ref       = "w11-assignment-rubric"
published        = true
provenance       = "~ Prof. Ashford's edition · Fall 2026 · built with thecoursemaker.com"