Week 15 — Policy Brief: One Question, Two Columns — Traditional alternative (no AI)

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

Assignment 14 of the term — compute the ratios and the lever both schools of thought share, argue one live policy question from both columns without a verdict, and explain to a non-expert what economists agree on and where they part ways.

This week you put the Keynesian tradition and the classical and monetarist tradition side by side, stated the agreed ground, and computed the deficit-to-GDP and debt-to-GDP ratios. In Week 6 you measured an output gap, in Week 7 you used the spending multiplier and met the deficit and the debt, and in Week 12 you used the quantity equation. In this brief you work four short problems, interpret each one, choose the right tool for one question, and explain to a cousin what economists agree on and where they part ways. This week's lecture tutorial, quiz, discussion, and Model Workshop practice the same ideas from other angles.

The task

This brief uses the week's illustrative numbers, constructed for this course and not real data, all in billions of dollars unless a problem says otherwise: a government that collects revenue of 400, spends 450, and starts the year owing a debt of 1,000 in an economy whose GDP is 1,250; an output gap economy with potential output of 1,000 and actual output of 950; a marginal propensity to consume of 0.8; and a quantity equation with velocity 4 and real output 1,000.

Work these four problems, showing every step on its own line:

1. In the illustrative budget, the government collects revenue of 400 and spends 450 in one year, and GDP is 1,250, all in billions of dollars. What is the deficit-to-GDP ratio, in percent?
2. In the same illustrative budget, the government starts the year owing a debt of 1,000, runs a deficit of 50, and GDP stays at 1,250, all in billions of dollars. What is the debt-to-GDP ratio at the end of the year, in percent?
3. In the illustrative output gap economy, potential output is 1,000 and actual output is 950, both in billions of dollars, and the marginal propensity to consume is 0.8. In the simple model, how much new government spending, in billions of dollars, closes the gap?
4. In the illustrative quantity equation, the money supply rises to 550 while velocity stays at 4 and real output stays at 1,000. What is the new price level?

Beside each figure, add one brief interpretation in plain words, plus a second part:

• For problem 1, say what the ratio means, and explain why the deficit, a flow, goes on top of the fraction rather than the debt, a stock.
• For problem 2, say what the ratio means, then choose the tool: explain why the debt-to-GDP ratio, rather than the raw debt of 1,050 billion dollars, is the right tool for judging whether this debt is large, and why the raw figure fits that question less well.
• For problem 3, say what the figure means in the Keynesian column, then state the strongest classical and monetarist objection to borrowing it (lags, crowding out, or the rising debt ratio). Label each claim you make positive or normative, and give no verdict.
• For problem 4, say what the new price level means, and explain why this long-run result is agreed ground that both schools state plainly rather than argue both ways.

Explain it to a non-expert

A cousin who volunteers on a city budget committee hears two economists on the news give opposite advice about a slowdown, and asks whether economists disagree about everything. Write a 3–5 sentence message your cousin could follow: one thing both schools agree on, the main place they part ways, and one honest limit, such as that the course's numbers are illustrative or that the evidence on how fast prices adjust is still debated. Explain any technical term in everyday words. More than one good answer can be defended.

For a different, ungraded example, imagine two weather forecasters who look at the same radar and disagree about whether to cancel an outdoor festival. Model message: "Both forecasters see the same storm on the same map, so they agree on the facts. They disagree about how fast it will move and how much a soaked crowd matters compared with a lost day of sales. The first part can be checked by watching the storm; the second part is a judgment about what matters more. Neither forecaster is lying, and a reasonable person could side with either one."

Use that pattern for the two economists, with your own explanation.

Here is one honest note about scope: every number in this assignment is illustrative, so do not add a real debt figure, a real deficit, or a real inflation target from the news. Real ratios move with real data, and real multipliers are smaller than the classroom model's, which is why this brief keys only on the model's numbers.

How to work

1. Draft all four figures, the four brief interpretations with their second parts, and your message for the cousin.
2. Check your draft against the attached scoring criteria, criterion by criterion: is the deficit, a flow, on top of the deficit ratio and the debt, a stock, on top of the debt ratio; is the gap divided by the spending multiplier; does each column get its strongest case with every claim labelled positive or normative; and is every figure explained in plain words?
3. Revise at least one calculation or explanation, and write two or three sentences on what you changed and why.

Deliverables

Submit your policy brief with all four figures, their brief interpretations and second parts, your message for the cousin, and your two or three sentences on the revision. You may submit it written, recorded as audio or video with a transcript, or as a labelled two-column sketch of the schools with a short note; every form is graded by the same scoring criteria.

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.

How you'll be graded

The full analytic rubric is attached to this assignment in Canvas.

After this assignment: the final

This is the last assignment of the course. Next comes the finals week, Week 16, which carries the final exam. The final's study guide, its exam-prep tutorial, and the Final Practice Exam help you prepare. The choose-the-tool step in problem 2 is the same move the final asks of you: read a question, pick the course tool that fits, and say why another one fits less well.

Academic integrity and AI use

The calculations, reasoning, and explanations must be your own work. This version is built to be completed without any AI tool, and no part of it requires one. Use the chapter, your notes, and a calculator or spreadsheet, and show every step so your work can be checked. Do not copy another student's figures or wording.

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