This question relates to the following news article New Zealand dollar drops to lowest value against US dollar since 2020 (27/09/2022) The New Zealand dollar has dropped to its lowest value against its US equivalent since March 2020. The bad news for Kiwis is that it means it'll take longer for consumer price inflation to fall. ...a weak Kiwi dollar means importing is more expensive. "While we do expect inflation rates to slowly fall from here, the longer the New Zealand dollar remains low. the slower it will take for those inflation rates to fall." ASB senior economist Mark Smith said. Six months ago the New Zealand dollar was US68.9c - now it's at US56.6c, a fall of 18 percent. Aotearoa's dollar is suffering because the US dollar is being pumped up by the US Federal Reserve lifting interest rates to tackle inflation. "interest rates globally are going up, and when rates are going up, generally people tend to look to where their money will be safest, and at the moment it's certainly the US economy, said But Finance Minister Grant Robertson sees two sides to this coin. "Clearly this will have some impact on imported goods coming into New Zealand, it actually has the opposite effect for exporters Why will a lower $NZ mean that it will be "it'll take longer for consumer price inflation to fall"?
This question relates to the following news article New Zealand dollar drops to lowest value against US dollar since 2020 (27/09/2022) The New Zealand dollar has dropped to its lowest value against its US equivalent since March 2020. The bad news for Kiwis is that it means it'll take longer for consumer price inflation to fall. ...a weak Kiwi dollar means importing is more expensive. "While we do expect inflation rates to slowly fall from here, the longer the New Zealand dollar remains low. the slower it will take for those inflation rates to fall." ASB senior economist Mark Smith said. Six months ago the New Zealand dollar was US68.9c - now it's at US56.6c, a fall of 18 percent. Aotearoa's dollar is suffering because the US dollar is being pumped up by the US Federal Reserve lifting interest rates to tackle inflation. "interest rates globally are going up, and when rates are going up, generally people tend to look to where their money will be safest, and at the moment it's certainly the US economy, said But Finance Minister Grant Robertson sees two sides to this coin. "Clearly this will have some impact on imported goods coming into New Zealand, it actually has the opposite effect for exporters Why will a lower $NZ mean that it will be "it'll take longer for consumer price inflation to fall"?
Chapter21: International Finance
Section: Chapter Questions
Problem 3QP
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This question relates to the following news article
New Zealand dollar drops to lowest value against US dollar since 2020 (27/09/2022)
The New Zealand dollar has dropped to its lowest value against its US equivalent since March 2020. The bad news for Kiwis is that it means it'll take longer for consumer price inflation to fall. ...a weak Kiwi dollar means importing is more expensive.
"While we do expect inflation rates to slowly fall from here, the longer the New Zealand dollar remains low. the slower it will take for those inflation rates to fall." ASB senior economist Mark Smith said.
Six months ago the New Zealand dollar was US68.9c - now it's at US56.6c, a fall of 18 percent. Aotearoa's dollar is suffering because the US dollar is being pumped up by the US Federal Reserve lifting interest rates to tackle inflation. "interest rates globally are going up, and when rates are going up, generally people tend to look to where their money will be safest, and at the moment it's certainly the US economy, said
But Finance Minister Grant Robertson sees two sides to this coin. "Clearly this will have some impact on imported goods coming into New Zealand, it actually has the opposite effect for exporters
Why will a lower $NZ mean that it will be "it'll take longer for consumer price inflation to fall"? (a diagram is not required but explaining what happens using the ADAS model is useful)
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