From annual observations from 1985 to 2005, the following regression results were obtained, where Y = exchange

Question:

From annual observations from 1985 to 2005, the following regression results were obtained, where Y = of the Canadian dollar to the U.S. dollar (CD/$) and X = ratio of the U.S. consumer price index to the Canadian consumer price index; that is, X represents the relative prices in the two countries:
Yt = -0.912 + 2.250X t, r2 = 0.440
se = 0.096
a. Interpret this regression. How would you interpret r2?
b. Does the positive value of Xt make economic sense? What is the underlying economic theory?
c. Suppose we were to redefine X as the ratio of the Canadian CPI to the U.S. CPI. Would that change the sign of X? Why?
Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...