Suppose That X₁ Is Measured with Error $\beta$ ₀ $\beta$

Suppose that X₁ is measured with error.
Y_i = $\beta$ ₀ + $\beta$ ₁X_1i + $\varepsilon$ _i
X_i = X*_1i + $\nu$ _i
Which of the following is most accurate?

A) The estimate of $\beta$ ₁hat will be larger than it should be.
B) The estimate of $\beta$ ₁hat will be smaller than it should be.
C) $\beta$ ₁hat will be biased toward zero.
D) We know $\beta$ ₁hat will be biased, but do not know which direction.

Correct Answer:

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