Suppose that the true population regression is Y = Bo + BiXi +2X2+ € but you mistakenly estimate the equation Y= bo + b1X1 + u (a) Suppose that cov(X₁, X2) = 0 and suppose B2> 0. Is b1 a biased estimate of B₁? If so, is the bias positive or negative? How do you know? (b) Suppose that cov(X₁,X2) = 0.475 and suppose B2> 0. Is bia biased estimate of B₁? If so, is the bias positive or negative? How do you know?

Suppose that the true population regression is Y = Bo + BiXi +2X2+ € but you mistakenly estimate the equation Y= bo + b1X1 + u (a) Suppose that cov(X₁, X2) = 0 and suppose B2> 0. Is b1 a biased estimate of B₁? If so, is the bias positive or negative? How do you know? (b) Suppose that cov(X₁,X2) = 0.475 and suppose B2> 0. Is bia biased estimate of B₁? If so, is the bias positive or negative? How do you know?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter4A: Problems In Applying The Linear Regression Model

Section: Chapter Questions

Problem 2E

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