Consider the following model Rrate 452 184drug 114 56 n 1

Consider the following model:

Rrate = 45.2 + 18.4drug

(11.4) (5.6)

n = 11,500 R2 = .459

where Rrate is the remission rate from a type of lymphoma for cancer patients and

drug is a dummy variable indicating if the patient tried a new experimental drug during

chemotherapy.

Let nodrug be a dummy variable equal to one if the patient didn’t try the new

experimental drug during chemotherapy and equal to zero otherwise.

a) If nodrug is used in place of drug in the model above, what happens to the intercept

in the estimated equation? What will be the coefficient on nodrug?

b) What will happen to R2 if nodrug is used in place of drug in the model above?

c) Should nodrug and drug both be included as independent variables in the model?

Explain.