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