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Question 3 (CHOICE ANSWER) Which of the following is true of dummy variables? A. A dummy...

Question 3 (CHOICE ANSWER)

Which of the following is true of dummy variables?

A. A dummy variable always takes a value less than 1.

B. A dummy variable always takes a value higher than 1.

C. A dummy variable takes a value of 0 or 1.

D. A dummy variable takes a value of 1 or 10.

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Answer #1

Dummy variable is a qualitative variable used in regression analysis.

It takes a value of 0 or 1, depending on absence or presence of some factor,

This is also called Boolean indicator since it takes value of 0 or 1 like in Boolean Algebra.

Dummy variables are also known as an Indicator variable or Design variable.

In regression analysis, the dependent variable may be influenced by a factor which is qualitative in addition to the quantitative variable. To take into account the effect of the qualitative factor, a dummy variable with value 0 or 1 is used to indicate presence or absence of the qualitative factor (for example, smoker/non smoker, gender etc)

Hence,

Answer: C

C. A dummy variable takes a value of 0 or 1

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