One of your peers wants to analyze the relationship between grade point average and growing up in urban or rural municipalities. Using the OLS estimator she estimates the following relationship:

GPA^ = 3.03 + 1.04 urban(1)

Where GPA is the grade point average when graduating from high school and urban is a binary variable equal to 1 if the person grew up in a urban municipality and 0 otherwise.

a. Interpret the result in equation (1)

In a separate regression she also decides to add a binary variable mother_college which is equal to 1 if the mother has a college degree and 0 otherwise:

GPA^ = 2.94 + 0.4 urban + 0.67 mother_college (2)

b. Why do you think the coefficient on the urban variable have changed so much in the second regression (equation 2). Explain your answer.