Option #1: Regression Model - A Paper How does Gross Domestic Product (GDP) affect currency exchange rates? One way to answer such a question is by using regression analysis. Complete the following:...

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Topic: Regression Analysis
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Introduction: How does a gross domestic product (GDP) affects the currency exchange rates? The best way to answer such kind of question is by using the regression analysis technique. In regression analysis, we use the dependent and independent variable approach to find the best line of equation to predict the value of the dependent variable.
Here, in our problem GDP is our independent variable and currency exchange rates (US/EUR) is our independent variable. Because GDP makes affect to the variable US/EUR.
1.
The data set is downloaded and there are three variables in the data set. Observation date, GDP and US/EUR. The observation data is unnecessary variable for the regression analysis. We will use only two variables for our problem.
2.
Scatter plot: Scatter plot is the best way to visualize the relationship between two variables. In scatter plot GDP is taken on the x-axis because it is out independent variable and US/EUR variable is taken on the y-axis as it our dependent variable. The scatter plot is plotted using the R software. The output is given as follows:
As we can seen from the above plot, there is trend between both the variable. which...