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

a. reduce; increase; appreciation
b. increase; reduce; appreciation
c. reduce; increase; depreciation
d. reduce; increase; appreciation

ANSWER

B