Which of the following statements is correct?
A) The number of dummy variables that must be added to a regression model is one less than the number of categories for a qualitative independent variable.
B) A dummy variable is incorporated into a regression model if the dependent variable is qualitative.
C) Including a dummy variable into a regression model will simplify the regression results and help people to interpret the meaning of the regression parameters.
D) The number of dummy variables that must be added to a regression model is one more than the number of categories for a qualitative independent variable.
E) All of these.

Question

Quizplus · Accepted Answer

Dummy variables are used in regression analysis to represent qualitative data. The correct number of dummy variables needed is one less than the number of categories to avoid the dummy variable trap, which can cause multicollinearity problems in the analysis.

Which of the Following Statements Is Correct