Question

A sample of 30 households’ family expenses from a city in the last year was taken. The value of the household expense (y, in dollars) was estimated. The independent variables included in the analysis were monthly rent (x1, in dollars), loan amount from a bank (x2, in dollars), medical expenses (x3, in dollars), and a dummy variable (x4), which equals 0 if the household does not have a child and equals 1 otherwise. The following regression results were obtained.

	Coefficients	Standard Error
Intercept	15,232.5	8462.5
x1	2178.4	778.0
x2	7.8	2.2
x3	2675.2	2229.3
x4	999.2	463.1

a. Fully interpret the meaning of the coefficient of the dummy variable (x4).

b. Estimate the value of household expenses (in dollars) for a household that has a monthly rent of $1000, a loan of $500 from a bank, no medical expenses, and 2 children.

Answer 1