A leader of the Workers Union in New Zealand would like to study the movement in the average hourly earnings of New Zealand workers. He collected and recorded data on average earnings (AE, $), labour cost7 (LC, $) and rate of inflation (RI, %). His data are saved in the t9e3 file.

a) Set up a suitable regression model to investigate the impact of labour cost and rate of inflation on the hourly earnings of an average New Zealand worker.

b) Do you expect the slope parameters to be positive or negative?

c) Estimate the regression model.

d) Do the estimated slope coefficients have the logical signs? Carefully explain the meanings of the estimated slope coefficients.

e) What do the unadjusted and the adjusted coefficients of determination tell you about the quality of the fit?

Suppose now that you have not estimated the regression model yourself but received a hard copy of the R printout from a friend (see on next page). However, your friend's printer was running out of ink and some details are not visible on your copy. Complete the remaining tasks using only this incomplete printout and the relevant statistical tables.

call: 1m(formula = AE ~ LC + RI) Residuals : Min 1Q Median 3Q Max -0. 238770 -0. 044388 -0. 006633 0. 040122 0.197037 coefficients : Estimate Std. Error t value Pr (>|t|) (Intercept) 0. 089571 -101.451