7. Purchasing power parity (PPP) focuses on the relationship between nominal interest rates and exchange rates between two countries. a. True b. False 8. Which of the following forecasting techniques would be most likely to use relationships between economic factors and exchange rate movements to forecast the future exchange rate? a fundamental forecasting b. market-based forecasting o technical forecasting d. mixed forecasting 9. Assume a forecasting model uses inflation differentials and interest rate differentials to forecast the exchange rate. Assume the regression coefficient of the interest rate differential variable is -,5, and the coefficient of the inflation differential variable is.4. Which of the following is true? a. The interest rate variable is inversely related to the exchange rate, and the inflation variable is directly (positively) related to the interest rate variable. b. The interest rate variable is inversely related to the exchange rate, and the inflation variable is directly related to the exchange rate. c. The interest rate variable is directly related to the exchange rate, and the inflation variable is directly related to the exchange rate. d. The interest rate variable is directly related to the exchange rate, and the inflation variable is directly related to the interest rate variable. 10. Sulsa Inc. uses fundamental forecasting. Using regression analysis, it has determined the following equation for the euro: euro = bo + b INF-1 + b2INC, -1 = .005 + 9INF) -1 + 1.1 INC,- 1