Assume you are considering including two additional qualitative variables into a regression model. The first variable has four categories, and the second variable has four categories as well. Given this information, how many indicator variables will be incorporated into the model?
A) 8
B) 7
C) 6
D) 5

Question

Quizplus · Accepted Answer

To include two additional qualitative variables in a regression model, we need to create indicator variables for each category of both variables. Since the first qualitative variable has four categories, we will create three indicator variables for it (considering the fourth as a reference category). Similarly, we will create three indicator variables for the second variable. Hence, the total number of indicator variables required will be 6.

Assume You Are Considering Including Two Additional Qualitative Variables into a Regression