<p>boohahaha, it's actually me that should be apologizing. I whipped out my old macro book from like two summers ago and looked up stagflation, cost-push inflation, and the like. You're definitely right. What I was confusing was the DOMESTIC demand for the dollar versus the INTERNATIONAL demand--and you're right, why would any country want a currency that is LOSING it's purchasing power? </p>
<p>Totally, TOTALLY my bad....I feel like...an idiot. Thanks for putting up with my argument lol.</p>
<p>actually paungle, I think you're right. Think about it, if the dollar is losing its purchasing power, that means the demand for money will increase, which will drive up interest rates. This will encourage foreign investors to come in and invest with high rates of return, causing the dollar to appreciate. That in turn will cause us exports to decrease and imports to increase, which lowers Xn. I'm pretty sure that makes sense.</p>
<p>so are my answers above right or wrong?</p>
<p>I'm positive you have 1a, 1b, 1c, 2c, 3b right. 3a is right if you mean the natural rate of unemployment is higher. The only one that I'm sure is wrong is 2a; supply of money should increase with an increase in income level. As for the rest, they could be either right or wrong; I'm not sure myself.</p>
<p>sorry.. i meant increase money supply..
typed too fast</p>
<p>np paungle, glad its all sorted out</p>