Econ122A+Sample+Final+Exam+-+Solutions

C using weekly rather than daily number of cigarettes

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Unformatted text preview: the above model will be a) biased away from zero, so that the impact of cigarette smoking on health is overestimated. b) biased towards zero, so that the impact of cigarette smoking on health is underestimated. c) unbiased. d) biased, but the direction of bias cannot be determined. Answer: A Included variable (cigarettes) is negatively correlated with the omitted variable (health consciousness) Omitted variable (health consciousness) is negatively correlated with dependent variable (Health) This leads to a positive bias in the estimate of β Since β > 0, the coefficient is overestimated (biased away from zero) ˆ 6. Which of the following is true regarding the OLS estimator β ? a) Using weekly rather than daily number of cigarettes smoked will ˆ lead to a more si...
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