Question: An economic development researcher wants to understand the relationship between the size of the monthly home mortgage or rent payment for households in a particular middle class neighborhood and the following set of household variables: family size, approximate location of the household within the neighborhood, an indication of whether those surveyed own or rent their home, gross annual income of the first household wage earner, gross annual income of the second household wage earner (if applicable), average monthly expenditure on utilities, and the total indebt ness (excluding the value of a home mortgage) of the household. Observations on each of these variables for a large sample of households are recorded in the file 02_06.xls.

a. Beginning with family size, iteratively add one explanatory variable and estimate the resulting regression equation to explain the variation in the monthly home mortgage or rent payment. If adding any explanatory variable causes the adjusted R2 measure to fall, do not include that variable in the subsequent versions of the regression model. Otherwise, include the variable and consider adding the next variable in the set. Which variables are included in the final version of your regression model.

b. Interpret the final estimated regression equation you obtained through the process outlined in part a. Also, report and interpret the standard error of estimate s_e the coefficient of determination R² for the final estimated model.