Question: Consider the model Y i = 1 + 2 X i + u i In practice we measure X i by

Consider the model

Yi = β1 + β2X∗i + ui

In practice we measure X∗i by Xi such that

a. Xi = X∗i + 5

b. Xi = 3X∗i

c. Xi = (X∗i + εi ), where εi is a purely random term with the usual properties.

What will be the effect of these measurement errors on estimates of true β1 and β2?

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