In the model y = β₀ + β₁x + β₂d + β₃xd + ε, the dummy variable and the interaction variable cause ________. A) a change in just the intercept B) a change in just the slope C) a change in both the intercept as well as the slope D) None of these choices are correct.

Question

Quizplus · Accepted Answer

The presence of a dummy variable and an interaction variable means that there will be different intercepts and slopes for different groups that the dummy variable represents. Therefore, both the intercept and the slope of the regression line will be affected.

In the Model Y = β0 + β1x + β2d

In the Model Y = β₀ + β₁x + β₂d