Assume a Forecasting Model Uses Inflation Differentials and Interest Rate

question 10

Multiple Choice

Assume a forecasting model uses inflation differentials and interest rate differentials to forecast the exchange rate. Assume the regression coefficient of the interest rate differential variable is -0.5, and the coefficient of the inflation differential variable is 0.4. Which of the following is true?

• A) The interest rate variable is inversely related to the exchange rate, and the inflation variable is directly (positively) related to the interest rate variable.
• B) The interest rate variable is inversely related to the exchange rate, and the inflation variable is directly related to the exchange rate.
• C) The interest rate variable is directly related to the exchange rate, and the inflation variable is directly related to the exchange rate.
• D) The interest rate variable is directly related to the exchange rate, and the inflation variable is directly related to the interest rate variable.

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Definitions:

Brain-Body Size Ratio

A comparative measure of brain size relative to body size, often used to make inferences about the intelligence or behavioral complexity of an organism.

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The species Homo sapiens, characterized by their ability to use complex language, make tools, and form social structures.

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Animal species refers to a group of organisms belonging to the animal kingdom that share common characteristics and genetics which differentiate them from other groups within the same kingdom.

Nervous System

A sophisticated system of neurons and synaptic connections that conveys neural signals throughout the body.