Week 14 Model Workshop: Follow a Stronger Dollar Through Prices and the Books

Part 1 — The Big Picture

This week you learned to read an exchange rate as the foreign currency one dollar buys, to call a rise in that number an appreciation, and to follow it through the price chain: exports get pricier abroad, imports get cheaper at home, net exports fall, and aggregate demand shifts left, so the price level and real output fall together. You also learned that the current account and the financial account are mirror images. In this Model Workshop you work a fresh illustrative economy that trades in pesos: you convert eight prices in both directions, size the shift with the spending multiplier while keeping the money multiplier out of it, shift aggregate demand in Desmos and read where the price level and real output land, balance the books, sort positive claims from normative ones, and then check a chatbot's account of the same economy.

Time budget: Plan for about 90 minutes.

Part 2 — The Task

Guiding question: When the dollar of this illustrative economy goes from 16 pesos to 20 pesos, what happens to the prices of its exports abroad and its imports at home, how far does aggregate demand shift and where do the price level and real output land, how do the current account and the financial account balance, and which claims about a strong dollar are positive rather than normative?

Workshop data: Peso exchange-rate price tables and balance-of-payments entries (illustrative)

Source: A workshop-only set of tables constructed for this course, not real data: an illustrative dollar-peso exchange rate before and after a move, four U.S. exports priced in dollars, four imports priced in pesos, the changes in exports and imports, a linear AD–AS pair, and four balance-of-payments entries, all printed in full in the scaffold tables.

• Rows: 4 exports and 4 imports, each with one price, plus 4 balance-of-payments entries; the export and import scaffold tables each show those 4 rows, and the balance-of-payments scaffold table shows the 4 entries plus 3 result rows, 7 rows; the first scaffold table, the exchange rate, has 1 row
• Exchange rate: 1 dollar = 16 pesos before the move and 1 dollar = 20 pesos after it
• Trade changes: exports fall by 30 and imports rise by 20, in billions of dollars, with a marginal propensity to consume of 0.75
• AD–AS pair: aggregate demand P = 26 − Y⁄100 before and P = 24 − Y⁄100 after, and short-run aggregate supply P = 6 + Y⁄100, with Y in billions of dollars and P an index

Part 3 — Materials & Procedure

Tools and materials

• Desmos (free) or Google Sheets (free)

Ways of working

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

Procedure

1. Open Desmos at desmos.com/calculator or a blank Google Sheets spreadsheet. Find the change and the percentage change in the rate: in Desmos, type 20-16 on one line and (20-16)/16*100 on the next; in Google Sheets, type 16 in B2, 20 in C2, =C2-B2 in D2, and =(C2-B2)/B2*100 in E2. Record both in the first scaffold table and name the move. Tool: Desmos (free) or Google Sheets (free). Check: A rise of a few pesos per dollar and a percentage change measured from the starting rate of 16.
2. Type the four exports into Google Sheets, names in column A and dollar prices in column B starting in row 8, then enter =B8*16 in C8 and =B8*20 in D8 and fill both down; in Desmos, type each product such as 400*16 and 400*20. Record every peso price in the second scaffold table. Tool: Desmos (free) or Google Sheets (free). Check: Every export costs more pesos at 20 pesos per dollar than at 16.
3. Type the four imports into Google Sheets, names in column A and peso prices in column B starting in row 14, then enter =B14/16 in C14 and =B14/20 in D14 and fill both down; in Desmos, type each quotient such as 8000/16 and 8000/20. Record every dollar price in the third scaffold table. Tool: Desmos (free) or Google Sheets (free). Check: Every import costs fewer dollars at 20 pesos per dollar than at 16.
4. Combine the export change of −30 and the import change of +20 into the change in net exports. Compute the spending multiplier with 1/(1-0.75) in Desmos or =1/(1-0.75) in Google Sheets, multiply it by the change in net exports, and record the shift in the fourth scaffold table. Beside it, record what 1/0.10 times the same change would wrongly give. Tool: Desmos (free) or Google Sheets (free). Check: A negative change in net exports, a spending multiplier between 1 and 10, and a leftward shift several times the change in net exports, next to a much larger wrong-multiplier figure.
5. In Desmos, type y=26-x/100 for aggregate demand and y=6+x/100 for short-run aggregate supply, letting x stand for real output Y and y for the price level P. Click the crossing to read it. Then type y=24-x/100 for aggregate demand after the appreciation and click the new crossing. Record both crossings in the fifth scaffold table. Tool: Desmos (free) or Google Sheets (free). Check: The second aggregate demand line sits to the left of the first, and its crossing with the unchanged supply line is lower and further left.
6. Add the two export entries and the two import entries from the sixth scaffold table, subtract imports from exports to find the current account, and use CA + FA = 0 to find the financial account; in Google Sheets, type =(220+80)-(290+50) in a free cell, or type the same expression without the equals sign in Desmos. Record all three cells. Tool: Desmos (free) or Google Sheets (free). Check: A negative current account and a financial account of the same size with the opposite sign, so the last cell is zero.
7. Answer the five analysis questions, then paste the prompt from the critique step into one approved chatbot, or complete the equivalent route below, and write your critique. Keep your Desmos graph or spreadsheet open so you can check each of the chatbot's figures against your own. Tool: Desmos (free) or Google Sheets (free). Check: Written answers and a critique that quotes the text it checks and corrects at least two errors.

Fallback route

When to use it: Use this route if neither Desmos nor Google Sheets is available, or if you cannot get online.

Do every calculation by hand or with any calculator, writing each step on its own line, and sketch the two aggregate demand lines and the short-run aggregate supply line on graph paper, marking every crossing. Complete all six scaffold tables, every analysis question, and the critique step from your hand work; submit the same items for equal credit.

This route earns the same credit as the primary route.

Part 4 — The Scaffold

The exchange rate: record the change in pesos per dollar and the percentage change, measured from the starting rate.

Student scaffold table 1

Quantity	Before	After	Change	Percentage change
Pesos one dollar buys	16	20

Four U.S. exports priced in dollars: multiply each dollar price by the rate to find what a buyer in the partner country pays.

Student scaffold table 2

Export	Price (dollars)	Price abroad at 16 pesos per dollar (pesos)	Price abroad at 20 pesos per dollar (pesos)
A ton of soybeans	400
A box of tractor parts	1,000
A software subscription	250
A hotel night here	150

Four imports priced in pesos: divide each peso price by the rate to find what a buyer here pays.

Student scaffold table 3

Import	Price (pesos)	Price here at 16 pesos per dollar (dollars)	Price here at 20 pesos per dollar (dollars)
A bolt of cotton fabric	2,400
A solar panel	8,000
A crate of avocados	640
A used delivery van	16,000

Net exports and the shift: combine the export and import changes, then size the shift of aggregate demand with the spending multiplier and record the money multiplier's figure only to show why it does not belong here.

Student scaffold table 4

Quantity	Value (billions of dollars unless noted)
Change in exports	−30
Change in imports	+20
Change in net exports
Spending multiplier, 1 ÷ (1 − 0.75)
Shift of aggregate demand at the old price level
Money multiplier figure, 1 ÷ 0.10 times the change, wrong link

Shifting aggregate demand: record each crossing as real output and the price level, before and after the appreciation.

Student scaffold table 5

Situation	Aggregate demand line	Real output Y (billions of dollars)	Price level P
Before the appreciation	P = 26 − Y⁄100
After the appreciation	P = 24 − Y⁄100

The balance of payments: add the trade entries into the current account, then use the identity to find the financial account.

Student scaffold table 6

Entry	Value (billions of dollars)
Exports of goods	220
Exports of services	80
Imports of goods	290
Imports of services	50
Current account, CA
Financial account, FA
CA + FA

Part 5 — Analysis Questions

1. Show the change and the percentage change in the rate, one export's and one import's price before and after, the change in net exports, the spending multiplier, and the shift of aggregate demand, every step on its own line. Then say each figure in a plain sentence, including whether the dollar appreciated or depreciated and why the money multiplier's figure in your fourth table does not answer this question.
2. Name the curve the appreciation shifts and its direction, give the crossing before and after, and explain why the price level and real output move together. Then compute the percentage change in real output from your fifth table and explain why the change in nominal spending, the price level times real output, is not the same as the change in output.
3. Use your sixth table to explain where the dollars spent on imports beyond export earnings end up, and why a current-account deficit is matched by a financial-account surplus rather than lost. Then say what a depreciation of the dollar back to 16 pesos would do to every arrow of the price chain.
4. Positive or normative? Sort these four claims about the illustrative economy, and for each positive claim name the number in your tables that tests it or the evidence that would: (1) In this model, the appreciation makes a ton of soybeans cost 8,000 pesos instead of 6,400. (2) The government ought to push the dollar back down, because export jobs matter more than cheaper imports. (3) In this economy, foreign inflows will mostly pay for new factories rather than for spending. (4) A strong dollar is good for the country because households can buy more.
5. Choose one and answer it in 3–4 sentences. (a) The changes in exports and imports are fixed numbers in this workshop. Explain how rising incomes in the partner country could keep U.S. exports from falling as much as the table shows, and what that means for the shift you computed. (b) The balance of payments here has no income or transfer flows. Explain how interest and profits paid to foreign owners of U.S. assets would change the current account in later years, and why that matters for the debate over a lasting deficit.

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 am studying an illustrative economy that trades with a partner country whose currency is the peso. The dollar goes from 1 dollar = 16 pesos to 1 dollar = 20 pesos. A ton of U.S. soybeans is priced at 400 dollars, and a solar panel made in the partner country is priced at 8,000 pesos. After the move, exports fall by 30 and imports rise by 20, in billions of dollars. The marginal propensity to consume is 0.75 and the required reserve ratio is 0.10. Aggregate demand is P = 26 − Y⁄100 and short-run aggregate supply is P = 6 + Y⁄100, with Y in billions of dollars. Did the dollar strengthen or weaken, and by what percent? What do the soybeans cost a buyer abroad and the solar panel cost a buyer here, before and after? How far does aggregate demand shift, and which multiplier sizes it? If aggregate demand becomes P = 24 − Y⁄100, what are the new price level and real output, and by what percent did output change? In the balance of payments, exports are 300 and imports are 340, with no income or transfer flows; what are the current account and the financial account? Finally, should the government try to push the dollar back down?

Test the response for these likely failures:

• Chatbots often multiply the fall in net exports by the money multiplier, 1 ÷ 0.10 = 10, and report a shift of 10 × 50 = 500 billion dollars, because the question also mentions a reserve ratio.
• Chatbots sometimes describe the stronger dollar as a movement along aggregate demand, borrowing the exchange-rate effect, or call the move from 16 to 20 pesos a weaker dollar.
• Chatbots often report the fall in nominal spending, from 16 × 1,000 = 16,000 to 15 × 900 = 13,500, as if it were the change in output, mixing the lower price level with less production.
• Chatbots often answer whether the government should push the dollar back down as if the price chain settled it, presenting a value judgment about exporters and import buyers as a fact.

In 3–5 sentences, quote the chatbot's answer on each of the four checks, say what it got right, and correct at least two errors using your own tables and the course rule, labelling which of its statements were positive and which were normative.

Equivalent route (no AI required)

No AI account is required for this Model Workshop. Instead of the chatbot, critique this flawed analysis, printed here in full: "The dollar went from 16 to 20 pesos, so it got weaker by 4 pesos. The solar panel now costs 8,000 × 20 = 160,000 dollars here, so imports fall. Net exports fall by 50, and with a reserve ratio of 0.10 the multiplier is 10, so aggregate demand shifts by 500 billion. The stronger dollar is a movement along aggregate demand, not a shift. Spending fell from 16,000 to 13,500, so output fell about 16 percent. The current account is −40, so 40 billion dollars has left the economy for good. The numbers prove the government should push the dollar back down." Mark it up: quote each flawed sentence, name what is wrong (an appreciation called a weaker dollar, a peso price multiplied instead of divided, the money multiplier used on a spending change, a shift of aggregate demand called a movement along it, nominal spending read as real output, a deficit read as money that disappears, and a normative judgment presented as a fact), cite the evidence from your tables or the course rule, and write a corrected sentence beneath it. This route assesses the same objectives (Objective 5 and Objective 8) 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 marked-up analysis is the submission artifact that replaces the chatbot report and share link.

Part 7 — What to Submit

• All six completed scaffold tables
• A screenshot of your Desmos graph with aggregate demand before and after the appreciation, or a labelled hand sketch of the lines and their crossings
• 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 an illustrative appreciation: six completed tables (the exchange rate, four exports, four imports, net exports and the shift, the aggregate demand crossings, and the balance of payments), a screenshot or sketch of aggregate demand before and after the appreciation, written answers to five analysis questions including the positive-or-normative sort, and a critique of a chatbot's account of the same economy, 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
Computing the price chain and the books from the data	The change and percentage change in the rate, every export and import price, the change in net exports, and both balance-of-payments accounts are computed from the printed tables, with every step shown and each price converted in the right direction.	Most figures are right, but one conversion runs the wrong way, the percentage is measured from the new rate, or steps are skipped.	No price-chain or balance-of-payments figures are computed, or the numbers are not drawn from the printed tables.
Shifting aggregate demand in the AD–AS model	The shift is sized with the spending multiplier, aggregate demand is shifted left, both crossings are read correctly, the price level and real output are shown falling together along the unchanged supply line, and real change is kept apart from nominal spending.	The shift is drawn, but the money multiplier sizes it, a crossing is misread, the direction is reversed, or real and nominal are mixed.	No aggregate demand shift is submitted.
Reading the identity and reversing the chain	The financial account is matched to the current-account deficit with the identity, the deficit is explained as returning as inflows, and every arrow of the price chain is reversed for a depreciation.	The identity is used, but the deficit is read as lost money, or one arrow keeps the appreciation's direction.	No identity or reversal work appears.
Positive versus normative	All four claims are sorted correctly, and each positive claim is tied to a number in the tables or to the evidence that would test it.	Two or three claims are sorted correctly, or the positive claims are not tied to evidence.	The sort is missing or fewer than two claims are sorted correctly.
Critique of the chatbot or the printed analysis	On either route, the chatbot critique or the equivalent route's marked-up analysis quotes the text it checks, corrects at least two errors with evidence from the tables or the course rule, and labels its positive and normative statements; both routes earn the same credit.	On either route, the critique names an error but does not correct it with evidence, or corrects only one.	On either route, no critique is submitted, or pasted output appears without any checking.

Quality Gate

• Every rate, price, change, and balance comes from your own calculation on the printed tables, never from memory or a chatbot.
• Every dollar price is multiplied by the rate and every peso price is divided by it, and the move to 20 pesos is named as an appreciation.
• The spending multiplier sizes the shift, and the money multiplier is recorded only as the wrong-link comparison.
• The aggregate demand shift is named with its direction, and the price level and real output are read from both crossings.
• The change in real output is kept apart from the change in nominal spending.
• The current account and the financial account sum to zero, with the financial account carrying the opposite sign.
• Each of the four claims is labelled positive or normative, with a number or a test beside each positive claim.
• No number, rule, or source is invented anywhere in the submission.
• The critique quotes the chatbot or the flawed analysis and corrects at least two errors with evidence or the course rule.