Assume you are considering including two additional qualitative variables into a regression model. The first variable has 4 categories, and the second variable has 4 categories as well. Given this information, how many indicator variables will be incorporated into the model?
A) 8
B) 7
C) 6
D) 5
E) 4

Question

Quizplus · Accepted Answer

To incorporate two qualitative variables with 4 categories each, we need to create 3 indicator variables for each variable. Therefore, a total of 6 (3 + 3) indicator variables will be incorporated into the model.

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