The Following Regression Analysis Was Conducted for the Inflation Rate

question 8

Multiple Choice

The following regression analysis was conducted for the inflation rate information and exchange rate of the British pound:

Regression results indicate that
= 0 and .Therefore:

• A) purchasing power parity holds.
• B) purchasing power parity overestimated the exchange rate change during the period under examination.
• C) purchasing power parity underestimated the exchange rate change during the period under examination.
• D) purchasing power parity will overestimate the exchange rate change of the British pound in the future.

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