Suppose y is determined by the true model y=β0+β1x+β2z+ε, and that β2 >0 and COV(z,x) < 0. If someone were interested in estimating β1, and did so by using OLS to estimate y = β0 + β1x + u, would the OLS estimator of β1 be biased or not? If it is unbiased, explain why. If it is biased, is the bias positive or negative? Why?
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