Question: Assume the correct model is y = beta subscript 1 plus beta subscript 2 left parenthesis x 2 right parenthesis plus beta subscript 3 left

Assume the correct model is y = beta subscript 1 plus beta subscript 2 left parenthesis x 2 right parenthesis plus beta subscript 3 left parenthesis x 3 right parenthesis plus e The correlation between X2 and X3 is 0.9, and as a result the model suffers from a collinearity problem. Given this, which of the following is true? a. If you drop X3 from the model, beta subscript 2 may become significant. b. If you drop X3 from the model, the model will suffer from an omitted variable bias. c. You should drop X3 from the model because it is an irrelevant variable. d. (a) and (b) are correct e. (a), (b) and (c) are all correct

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