If a decision maker wishes to develop a regression model in which the University Class Standing is a categorical variable with 5 possible levels of response, then he will need to include how many dummy variables?
A) 5
B) 4
C) 1
D) 3

Question

Quizplus · Accepted Answer

When using categorical variables in a regression model, one less than the number of categories is used as dummy variables to avoid the dummy variable trap. Therefore, for 5 levels, 5 - 1 = 4 dummy variables are needed.

If a Decision Maker Wishes to Develop a Regression Model