A Regression Model Was Applied to Explain Movements in the Canadian

Multiple Choice

A regression model was applied to explain movements in the Canadian dollar's value over time. The coefficient for the inflation differential between the United States and Canada was 0.2. The coefficient of the interest rate differential between the United States and Canada produced a coefficient of 0.8. Thus, the Canadian dollar depreciates when the inflation differential ____ and the interest rate differential ____.

A) increases; increases
B) decreases; increases
C) increases; decreases
D) decreases; decreases