Assume that the United States invests heavily in government and corporate securities of Australia. In addition, residents of Australia invest heavily in the United States. Approximately $5 trillion worth of investment transactions occur between these two countries each year. The total dollar value of trade transactions per year is about $8 million. Then ____ directly influences their exchange rate the most.
inflation and interest rate differentials
interest rate differentials
income differentials only
inflation and income differentials
inflation differentials only