Question: 9.3 A variable Q is determined by the model Q = 1 + 2X + v, where X is a variable and v is a

9.3 A variable Q is determined by the model Q = β1 + β2X + v, where X is a variable and v is a disturbance term that satisfies the Gauss–Markov conditions.

The dependent variable is subject to measurement error and is measured as Y where Y = Q + r and r is the measurement error, distributed independently of v. Describe analytically the consequences of using OLS to fit this model if

(1) The expected value of r is not equal to 0 (but r is distributed independently of Q),

(2) r is not distributed independently of Q (but its expected value is 0).

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