Week 15 — Graph & Model Workshop · "The Policy Debate Scorecard"

Course: Principles of Macroeconomics (ECON 2) · Silver Oak University (fictional sample) · Prof. Ashford
Objectives 1, 5–8 (synthesis) — macroeconomic modeling & applying reasoning to real-world policy · SLO A & B
Worth 50 points · Model Workshops group = 15% of the grade · Workshop 15
Format: given three engineered scenarios, work out what EACH school of thought — Keynesian and classical/monetarist — prescribes and why, plus the Meadowland debt arithmetic; then catch the AI's mistakes on fairness, not just facts.

This is the course's signature weekly component — and this week is its evenhandedness capstone. There is no "correct school" anywhere in this workshop. You will be graded on whether you can state both schools' positions accurately and at full strength, and on your own debt-ratio arithmetic — never on which school you personally favor.

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Part 1 — The Big Picture

All term, you've built one shared macro toolkit — GDP, AD–AS, fiscal policy, money and the Fed, the Phillips curve. This week you use that same toolkit to do what economists actually spend most of their time doing: applying it to real situations and comparing what different schools of thought conclude. You'll work through three different macro situations — a recessionary gap, a supply shock, and a high-debt-plus-gap scenario — and for each one, write out what a Keynesian economist would recommend, what a classical/monetarist economist would recommend, and why each reaches that conclusion. Then you'll do the debt arithmetic that makes the third scenario concrete. No tool link is required this week — this is a reasoning-plus-arithmetic workshop; a calculator or spreadsheet is enough for the debt ratios.

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Part 2 — The Guiding Question

When Keynesian and classical/monetarist economists look at the SAME economic situation, what does each one actually recommend — and can you state each school's reasoning well enough that an economist from that school would recognize it as fair?

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Part 3 — Set Up the Scorecard

Build a simple table (in a document or spreadsheet) with these columns, and one row per scenario:

Scenario	Keynesian prescription	Keynesian mechanism (why)	Classical/monetarist prescription	Classical/monetarist mechanism (why)
1. Recessionary gap
2. Supply shock
3. High debt + gap

The three scenarios (use these numbers exactly — verified):

Scenario 1 — Recessionary gap. Meadowland's potential output is Y* = 1,000. Actual output has fallen to Y = 960.

Scenario 2 — Supply shock. An oil-price spike pushes SRAS left (input costs have risen sharply). Meadowland's price level begins rising while real output falls — the classic stagflation pattern.

Scenario 3 — High debt + gap. Meadowland is simultaneously in a recessionary gap (as in Scenario 1) and carrying a national debt of $12 trillion against a GDP of $15 trillion, with a current-year deficit of $0.6 trillion.

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Part 4 — Solve (complete this scaffold)

Fill in the blanks. Show every step of the arithmetic.

Scenario 1 — Recessionary gap arithmetic

Question	Your answer
(a) Recessionary gap = Y* − Y = 1,000 − ?	______
(b) Gap as a percent of potential = gap ÷ Y* × 100	______%
(c) Keynesian prescription: what should G and/or T do?	______
(d) Classical/monetarist prescription: what's the recommended stance, and why?	______

Scenario 2 — Supply shock (qualitative — no new arithmetic; recap the AD–AS canon)

Question	Your answer
(e) Which curve shifts, and which direction?	______
(f) What happens to the price level (P) and real output (Y)?	______
(g) Why is a supply shock a HARDER case for policy than a demand-side gap (name the reason both schools would agree on)?	______

Scenario 3 — High debt + gap (the debt arithmetic)

Question	Your answer
(h) Debt-to-GDP ratio = debt ÷ GDP × 100 = 12 ÷ 15 × 100	______%
(i) Deficit-to-GDP ratio = deficit ÷ GDP × 100 = 0.6 ÷ 15 × 100	______%
(j) If Meadowland runs the SAME $0.6T deficit again next year, what will the debt be?	$______T
(k) What will next year's debt-to-GDP ratio be (against the same $15T GDP)?	______%
(l) Keynesian view of running MORE deficit-financed stimulus here, despite the 80% ratio:	______
(m) Classical/monetarist view of running MORE deficit-financed stimulus here, given the 80% ratio:	______

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Part 5 — Interpret in Words (this is the SLO-A and SLO-B skill)

In 3–4 sentences, explain (a) what the Scorecard table shows about why two well-trained economists can look at the identical Meadowland numbers and recommend different things, and (b) why the debt-to-GDP number itself (Part 4h) is a positive, factual calculation, while "the government should reduce this ratio right away" is a normative claim. (Hint: point to the underlying mechanism each school names — sticky prices vs. lags/rules — not just "they disagree.")

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Part 6 — Analysis Questions

1. In Scenario 3, the debt-to-GDP ratio is already 80% before any new stimulus is considered. Explain, fairly to both sides, how this fact changes the classical/monetarist case (what specific concern grows) and whether it necessarily changes the Keynesian case (does an existing high ratio, by itself, refute the argument for closing a real gap — why or why not).
2. Connect to policy: name ONE piece of agreed ground between the two schools that is relevant to all three scenarios (something they do not disagree about), and explain in one sentence why it's agreed ground rather than a contested claim. (You are not being asked to pick a side — just to correctly separate the agreed ground from the genuine disagreement.)
3. If you had to bet which scenario would produce the narrowest gap between what the two schools recommend, and which would produce the widest gap, which would you pick and why? (There's no single "correct" answer here — full credit for reasoning that correctly uses each school's own stated mechanisms, not a guess.)

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Part 7 — AI-Critique Moment (required — the BYOAI step)

Bring in your approved chatbot (Gemini, Claude, or ChatGPT) and be the economist who checks its work — this week, checking for FAIRNESS is as important as checking for arithmetic.

1. Paste this to the chatbot: "Meadowland is in a recessionary gap (potential output 1,000, actual output 960) AND has a debt-to-GDP ratio of 80% (debt $12 trillion, GDP $15 trillion). What would a Keynesian economist recommend, and what would a classical/monetarist economist recommend? Which one is correct?"
2. Audit every claim against your own work:
   - Did it correctly compute the gap (40, or 4% of potential) and the debt-to-GDP ratio (80%)? Chatbots can slip on the gap-percentage arithmetic or flip the debt/GDP division.
   - Did it state the Keynesian case (sticky prices, active stabilization) and the classical/monetarist case (flexible prices given time, lags, rules, crowding-out) each fully and fairly, in that school's own terms?
   - Did it answer "which one is correct"? It should NOT — a good answer either declines to pick a winner or explicitly says this is a genuinely contested question among economists. If it picked a "correct" school, that is the fairness failure to catch.
3. Write 2–3 sentences naming what the AI got right and at least one thing you had to correct or watch — most commonly, either an arithmetic slip OR the AI quietly picking a "winner" between the schools. (If it got everything right, including declining to rank the schools, explain how you verified that.)

The habit all term: the tool drafts, you judge. This week, judging means checking BOTH the numbers and the fairness — a chatbot that computes 80% correctly but then tells you "the Keynesian view is more accurate" has failed just as badly as one that gets the arithmetic wrong.

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Part 8 — What to Submit

One document (or text entry) with: your Part 4 scaffold (all three scenarios, with arithmetic shown for 1 and 3), your Part 5 interpretation, your Part 6 answers, and your Part 7 AI-critique paragraph. Due Sun, Dec 13, 11:59 p.m. (50 points).

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Instructor answer key — REMOVE BEFORE PUBLISHING TO STUDENTS

Every number pre-computed and independently verified. Both schools' answers are given at full strength — no verdict.

Scenario 1 — Recessionary gap

• (a) 1,000 − 960 = 40. ✓
• (b) 40 ÷ 1,000 × 100 = 4%. ✓
• (c) Keynesian: increase G and/or decrease T (expansionary fiscal policy), sized with the multiplier, to push AD right and close the gap faster than waiting for sticky prices to adjust on their own; monetary easing may support this. ✓
• (d) Classical/monetarist: because prices adjust given time, the gap tends to self-correct; given long and variable lags, a deliberately timed stimulus risks arriving after the gap has already begun closing on its own — the recommended stance leans toward restraint or a steady, rule-based response rather than active fine-tuning. ✓

Scenario 2 — Supply shock

• (e) SRAS shifts LEFT (input/oil price increase). ✓
• (f) P rises, Y falls — the stagflation pattern (graph-logic canon, Week 5/6). ✓
• (g) A single fiscal or monetary lever pushes P and Y in the SAME direction (e.g., expansionary policy raises both, or contractionary policy lowers both) — it cannot simultaneously push P down AND Y up the way a demand-side gap allows a single lever to fix both problems at once. Both schools recognize this is a genuinely harder case; they differ on the recommended response (Keynesians may favor targeted support to cushion the output loss while tolerating some inflation; classical/monetarist economists lean toward not intervening on the price side and letting supply conditions normalize, citing lags and the risk of worsening the inflation half). ✓

Scenario 3 — High debt + gap

• (h) 12 ÷ 15 × 100 = 80%. ✓
• (i) 0.6 ÷ 15 × 100 = 4%. ✓
• (j) $12T + $0.6T = $12.6T. ✓
• (k) 12.6 ÷ 15 × 100 = 84%. ✓
• (l) Keynesian: the cost of a prolonged gap (idle workers, permanently lost output) can justify additional deficit-financed stimulus even with an elevated debt ratio, especially if the stimulus is temporary and the gap is real — a normative weighting that treats the near-term output loss as the more urgent risk right now. ✓
• (m) Classical/monetarist: an already-elevated 80% ratio heightens concern about crowding out (more borrowing competing for loanable funds, raising interest rates) and about the long-run burden of accumulating debt — this tradition would lean toward caution or a rule-based response rather than adding more deficit spending, treating the debt trajectory itself as the more urgent risk. ✓
• Part 5: two economists can look at identical Meadowland numbers and reach different conclusions because they weight different underlying MECHANISMS — sticky prices and the cost of waiting (Keynesian) versus lags, rules, and crowding-out (classical/monetarist) — not because one side has the facts wrong. The 80% debt-to-GDP ratio itself (4h) is a POSITIVE, computed fact (12÷15×100); "the government should reduce this ratio right away" is NORMATIVE — a value judgment about urgency and priorities that the raw ratio alone does not settle.
• Part 6: (1) An already-high 80% ratio sharpens the classical/monetarist concern about crowding out and long-run debt burden — MORE borrowing now competes harder for funds and adds faster to an already-elevated stock. It does NOT, by itself, refute the Keynesian case for closing a REAL gap — a Keynesian would argue the gap's cost is a separate question from the debt level, though a high ratio may argue for a SMALLER or more targeted stimulus rather than abandoning stabilization altogether. Full credit for any answer that keeps both schools' reasoning fair and does not declare one refuted. (2) Agreed ground relevant to all three scenarios: e.g., the short-run/long-run distinction itself — both schools accept that short-run and long-run dynamics differ; they simply weight the short run differently. (Also acceptable: the vertical long-run Phillips curve; sustained high inflation as a long-run monetary phenomenon.) (3) No single correct answer — full credit for reasoning that correctly applies each school's own mechanism (e.g., Scenario 2's supply shock is plausibly the WIDEST gap because neither lever fixes both P and Y at once, forcing schools to reveal which they'd sacrifice; Scenario 1's plain demand-side gap is plausibly the NARROWEST because both schools agree it will resolve eventually and differ mainly on timing/method, not on the diagnosis).

Grading rubric — 50 points

Criterion	Full	Partial	None
Scorecard scaffold (Part 4) — all three scenarios' arithmetic and both schools' prescriptions correct (Scenario 1 gap=40/4%; Scenario 2 SRAS-left/P↑Y↓; Scenario 3 ratios 80%/4%/84%) (20)	20	10–16	0–8
Interpretation (Part 5) — mechanism-based explanation of disagreement; positive vs. normative correctly applied to the debt ratio (10)	10	5–8	0–4
Analysis (Part 6) — fair treatment of both schools; correct agreed-ground identification; reasoning-based scenario comparison (12)	12	6–10	0–5
AI-critique (Part 7) — names a specific arithmetic AND/OR fairness catch (8)	8	4–6	0–3

Quality gate (self-checked): quantitative gate — gap 1000−960=40 (4%); debt-to-GDP 12/15×100=80%; deficit-to-GDP 0.6/15×100=4%; next-year debt 12.6/15×100=84% — all Python-re-verified ✓. Graph-logic check — Scenario 2 SRAS shifts LEFT → P↑, Y↓ (stagflation) verified against the canon ✓; both schools' mechanisms (sticky prices/activism vs. flexible-prices/lags/rules/crowding-out) stated at full strength in every scenario, with NO verdict anywhere in the key ✓. Quantitative gate: PASS. Graph-logic check: PASS.