Assuming that you are trying to determine the true effect of how years of education affect career earnings (Earnings_i = β₀ + β₁Education_i + U_i), and that this effect is positive . What would be the likely induced correlation between Education and U_i of receiving a sample that only had individuals that made over $85,000? A) Negative B) Positive C) There is not enough information. D) None of the answers is correct.

Question

Quizplus · Accepted Answer

In a sample with individuals making over $85,000, those with less education likely have other factors (U) compensating for their lower education to still achieve high earnings. This suggests a negative correlation between education and U, as higher U is needed for those with less education to reach the earnings threshold.

Assuming That You Are Trying to Determine the True Effect