Consider the following population regression model relating the dependent variabley*and theregressorX*, However, during the data collection, the...

Consider the following population regression model relating the dependent variable y* and the regressor X*, 

However, during the data collection, the regressor is measured with error, i.e., the observed regressor is 

X=X* +V 

a) Suppose Cov(, V,) 0, please show why OLS estimator will be biased. 

b) If there exists an exogenous variable Z which is a valid instrument for X, please state two 

assumptions that Z should satisfy.