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Assume that inflation in Australia and New Zealand are currently equal at 4%. New information has arrived, suggesting that Australia can expect significantly higher inflation

Assume that inflation in Australia and New Zealand are currently equal at 4%. New information has arrived, suggesting that Australia can expect significantly higher inflation growth over the next year. In this case, PPP theory would predict Australias imports to ________, exports to ________, and the Australian dollar to _______ against the New Zealand dollar.

A.

Increase; decrease; depreciate.

B.

Decrease; increase; appreciate.

C.

Decrease, decrease, appreciate.

D.

Increase, decrease, appreciate.

E.

None of the options.

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