Karen wants to use a categorical variable, levels of education, to predict annual income. There are six categories in the levels of education: High school graduate, Some college, Associate's degree, Bachelor's degree, Master's degree, Doctorate, or professional degree. How many categories need to be dummy coded and included in the regression model as predictors?
A) 4
B) 5
C) 6
D) 7

Question

Quizplus · Accepted Answer

When using categorical variables in a regression model, one less than the total number of categories needs to be dummy coded to avoid multicollinearity. Since there are six categories, only five need to be dummy coded.

Karen Wants to Use a Categorical Variable, Levels of Education