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)
Responses

Demand for New Zealand goods will rise.
Demand for New Zealand goods will rise.

Demand for Australian goods will rise.
Demand for Australian goods will rise.

There is no way of gauging the impact of inflation without more details regarding New Zealand's imports and exports.
There is no way of gauging the impact of inflation without more details regarding New Zealand's imports and exports.

Inflation in New Zealand will not change the demand for either countries' goods.

Answer 1

If the inflation rate in New Zealand rises relative to the inflation rate in Australia, it generally means that goods and services in New Zealand are becoming more expensive compared to those in Australia. As a result, consumers in both countries may seek cheaper alternatives.

In this scenario, we can infer that:

- New Zealand goods become relatively more expensive.
- Australian goods remain relatively cheaper.

Therefore, the demand for New Zealand goods will likely decrease while the demand for Australian goods will increase.

The correct response is:
**Demand for Australian goods will rise.**