Write your answer in the space provided by selecting the factor influencing each statement's exchange rate. DIFFERENTIALS IN INFLATION PUBLIC DEBT DIFFERENTIALS IN INTEREST RATES TERMS OF TRADE CURRENT ACCOUNT DEFICITS STRONG ECOOMIC PERFORMANCE 1. Big loans promote inflation because if inflation is high, the debt will be serviced and eventually paid off with cheaper actual dollars.| 2. Countries with higher inflation usually see their currency depreciation compared to their trading partners' currencies. 3. The government spends more on international trade than it receives and that it borrows money from foreign sources to make up the deficit. 4. Political instability will lead to a lack of confidence in a currency and a transfer of capital to more prosperous countries' currencies. 5. The ratio of export rates and import prices, the terms of exchange and current accounts, and the balance of payments are linked