Sulsa IncUses Fundamental Forecasting $\begin{aligned} \text { euro }_{t} &=b_{0}+b I N t_{t-1}+b_{2} I N C_{t-1} \\ &=.005+.9 I N F_{t-1}+1.1 I N C_{t-1} \end{aligned}$

question 17

Multiple Choice

Sulsa Inc.uses fundamental forecasting.Using regression analysis,it has determined the following equation for the euro:
$\begin{aligned} \text { euro }_{t} &=b_{0}+b I N t_{t-1}+b_{2} I N C_{t-1} \\ &=.005+.9 I N F_{t-1}+1.1 I N C_{t-1} \end{aligned}$
The most recent quarterly percentage change in the inflation differential between the U.S.and Europe was 2 percent,while the most recent quarterly percentage change in the income growth differential between the U.S.and Europe was -1 percent.Based on this information,the forecast for the euro is a(n) __________ of _______%.

• A) appreciation;3.4
• B) depreciation;3.4
• C) appreciation;0.7
• D) appreciation;1.2

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