6. Fundamental forecasting: Regression model: BPt = b0+ b1 INFt-1 + b2 INCt +ut Regression Coefficients Estimates bo 0.002 b1 0.8 b2 1.0 Inflation in the last period, INFt-1, is 4%. The income change in current period, INCt, can be estimated from the following: Probability Possible changes In INCT 20% 1.5% 50% 2% 30% 2.2% a. What is the expected income differential (INCt)? b. What is the expected change in BP in period t? 6. Fundamental forecasting: Regression model: BPt = b0+ b1 INFt-1 + b2 INCt +ut Regression Coefficients Estimates bo 0.002 b1 0.8 b2 1.0 Inflation in the last period, INFt-1, is 4%. The income change in current period, INCt, can be estimated from the following: Probability Possible changes In INCT 20% 1.5% 50% 2% 30% 2.2% a. What is the expected income differential (INCt)? b. What is the expected change in BP in period t