Assume that the UK inflation rate is higher than the New Zealand inflation rate. This will cause UK consumers to ____ their imports from New Zealand and New Zealand consumers to ____ their imports from the UK. According to purchasing power parity (PPP), this will results in a(n) ____ of the New Zealand dollar (NZ$).

Question

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When the UK inflation rate is higher than New Zealand's, UK consumers will find New Zealand goods relatively cheaper, leading to an increase in imports from New Zealand. Conversely, New Zealand consumers will find UK goods more expensive, reducing their imports from the UK. According to PPP, this increased demand for New Zealand goods will lead to an appreciation of the New Zealand dollar.

Assume That the UK Inflation Rate Is Higher Than the New