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ate differentials。 inflation differentials D) interest rate differentials。 inflation and ine differentials E) inflation and ine differentials。 interest rate differentials Answer: B 14. If inflation increases substantially in Australia while . inflation remains unchanged, this is expected to place _______ pressure on the value of the Australian dollar with respect to the . dollar. A) upward B) downward C) either upward or downward (depending on the degree of the increase in Australian inflation) D) none of these。 there will be no impact Answer: C 15. Assume that Japan places a strict quota on goods imported from the . and the . places a strict quota on goods imported from Japan. This event should immediately cause the . demand for Japanese yen to _______, and the supply of Japanese yen to be exchanged for . dollars to _______. A) increase。 increase B) increase。 decline C) decline。 decline D) decline。 increase Answer: E 16. Which of the following is not mentioned in the text as a factor affecting exchange rates? A) relative interest rates. B) relative inflation rates. C) government controls. D) expectations. E) All of these are mentioned in the text as factors affecting exchange rates. Answer: C a country experiences an increase in interest rates relative to . interest rates, the inflow of . funds to purchase its securities should _______, the outflow of its funds to purchase . securities should _______, and there is _______ pressure on its currency’s equilibrium value. A) increase。 decrease。 downward B) decrease。 increase。 upward C) increase。 decrease。 upward D) decrease。 increase。 downward E) increase。 increase。 upward