If the Measurement Error Is in the Independent Variable, Then

question 19

Multiple Choice

If the measurement error is in the independent variable, then

• A) We don't need to worry about bias, the measurement error will be reflected in the error term.
• B) The bigger the measurement error, the bigger the variance of the error term.
• C) We will have a case of attenuation bias, where the coefficient will be closer to 0 than it should be.
• D) We will have a case of attenuation bias, where the coefficient is larger than it should be.

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Definitions:

State of Nature

A term used in decision theory and statistics to refer to the actual but unknown condition or outcome of a particular phenomenon.

Decision Tree

A decision tree is a graphical representation used in decision analysis to display choices and their possible outcomes, including chance event outcomes, resource costs, and utility.

Opportunity Loss

The difference in value between the chosen option and the best possible option that was not chosen.

Optimal Alternative

The best or most effective option among a set of alternatives, under given conditions.