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)

Question

Responses

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

Demand for Australian goods will rise.

Answer 1

If the inflation rate in New Zealand rises relative to the inflation rate in Australia, this means that the prices of goods and services in New Zealand are increasing at a faster rate than in Australia. As a result, New Zealand consumers may find Australian goods relatively cheaper due to the relative price increase in their local market. Conversely, consumers in Australia may find New Zealand goods more expensive, which can lead to a decrease in demand for those goods.

Therefore, the correct response would be:

Demand for Australian goods will rise.