Question

which of the following plays a significant role in determining exchange rates between two countries?
distribution of income amongst the population of each country
level of foreign direct investment in the two countries
availability of credit for consumers in each of the countries
supply and demand for the goods and services offered by the countries
what factor caused the value of nations currency to fall compared to other countries
high levels of inflation
high levels of export activity
low levels of public debt
low levels of unemployment

Explanation:

1. Exchange - rates are influenced by multiple factors. Foreign direct investment can affect the supply and demand of currencies. Higher foreign direct investment in a country may increase the demand for its currency, thus impacting the exchange - rate. The other options like income distribution, consumer credit availability have more domestic - economy focused impacts rather than direct significant impacts on exchange - rates.
2. High levels of inflation reduce the purchasing power of a nation's currency. When a country has high inflation, its goods and services become relatively more expensive compared to other countries. This leads to a decrease in the demand for its currency in the foreign - exchange market, causing its value to fall. High export activity usually strengthens a currency, low public debt is generally positive for a currency's value, and low unemployment is more of a domestic economic indicator with an indirect and not negative impact on currency value.

Answer:

1. B. level of foreign direct investment in the two countries
2. A. high levels of inflation