Suppose you are interested in the marginal propensity to consume
according to the following population regression model:
Model 1: , with denotes household ‘s average annual consumption and denotes a measure of household ‘s permanent income. Suppos that your sample consists of a random sample of consumption and income data from the entire population of U.S. households, which is your population of interest.
NOTE: There is no single right answer for the following questions. You will be graded on your justification of your answer.
Suppose that a computer glitch causes you to lose all the observations for which . Will ordinary least squares still provide an unbiased estimator of if you estimate Model 1 using the remaining data? Explain.
