In the case of errors-in-variables bias,the precise size and direction of the bias depend on
A)the sample size in general.
B)the correlation between the measured variable and the measurement error.
C)the size of the regression R2.
D)whether the good in question is price elastic.

Question

Quizplus · Accepted Answer

The size and direction of the errors-in-variables bias depend on the correlation between the measured variable and the measurement error. Specifically, as the correlation increases, the bias also increases. Therefore, option B is the correct choice. The other options (sample size, regression R2, and price elasticity) do not have a direct impact on errors-in-variables bias.

In the Case of Errors-In-Variables Bias,the Precise Size and Direction