Question: 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

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 ____.

increases; increases

increases; decreases

decreases; decreases

decreases; increases

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