1. Business
2. Finance
3. International Finance
4. Foreign Exchange Rates
5. 41776

Question: If the U.S. and Japan engage in much capital flows but little trade, _______ directly influences their exchange rate the most. If the U.S. and Switzerland engage in much trade but little capital flows, _______ directly influences their exchange rate the most.

a) interest rate differentials; interest rate differentials
b) inflation and interest rate differentials; interest rate differentials
c) income and interest rate differentials; inflation differentials
d) interest rate differentials; inflation and income differentials
e) inflation and income differentials; interest rate differentials