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10 Pages • Essays / Projects • Year: Pre-2021
Country B has a considerably high inflation rate of 4.8% compared to country B of 2.8%. This low inflation makes it a more beneficial country market to develop business in, as it will have a stronger currency. Subsequently, this makes imports cheaper and will decrease the costs of production when importing resources from another country. Alternatively, Country B’s nominal prices will increase, making the goods more expensive and less desirable, and therefore, competitiveness decreases. Additionally, the Governor has agreed that the appropriate target for monetary policy is to achieve an inflation rate of 2–3 per cent, on average, over time (Reserve Bank Act 1959).
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