Consider the multiple regression model with two regressors X₁ and X₂, where both variables are determinants of the dependent variable. When omitting X₂ from the regression, then there will be omitted variable bias for $\widehat { \beta 1 }$ A)if X₁ and X₂ are correlated B)always C)if X₂ is measured in percentages D)if X₂ is a dummy variable

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Omitted variable bias occurs when a relevant variable that is correlated with both the dependent variable and one or more of the included independent variables is left out of the regression model.

Consider the Multiple Regression Model with Two Regressors X1 and X2

Consider the Multiple Regression Model with Two Regressors X₁ and X₂