Question

if the inflation rate in new zealand were to rise relative to the inflation rate in russia australia, which of the following correctly explains what would happen to the demand for australian or new zealand goods? (1 point) there is no way of gauging the impact of inflation without more details regarding new zealand’s imports and exports. demand for new zealand goods will rise. inflation in new zealand will not change the demand for either countries’ goods. demand for australian goods will rise.

Explanation:

When a country's (New Zealand) inflation rate rises relative to another (Australia), New Zealand's goods become relatively more expensive (due to higher inflation - related price increases) while Australian goods become relatively cheaper. Consumers (both domestic in New Zealand and international) will tend to shift their demand towards the relatively cheaper Australian goods, so the demand for Australian goods will rise. The other options are incorrect: the first option is wrong as we can use basic inflation - exchange rate/demand logic; the second is wrong as NZ goods become more expensive so demand for them should fall; the third is wrong as inflation differences do impact cross - border demand for goods.

Answer:

D. Demand for Australian goods will rise.