3. Does purchasing power parity exist? In addition to testing for purchasing power parity (PPP) by plotting individual points (combinations of interest rate differentials and changes in the spot rate of the foreign currency between two countries) on a graph, you can also test for PPP using regression analysis. In particular, consider the Following regression model: ez=0+ G., -1) + Where ep Is the percentage change in the foreign currency value, IA is the inflation rate of the home currency, and Iy is the inflation rate of the foreign currency co and are coefficients to be estimated, while is the error term. if the theory of ppp were true, what would be the values of any and az (Hint: Assume the average value of the error term is 0.) O-1, = 1 =0,01 do=0,00 401,00 Which of the following factors influence the exchange rate of a currency? Check all that apply. changes in relative interest rates changes in government controls changes in expectations of future exchange rates changes in relative Income levels by only the Changes in relative inflation rates by more than just relative inflation exchange rate movements be Because the exchange rate for a currency is influenced predicted entirely by PPP