A Variable That Takes on the Values of 0 or 1

question 21

Multiple Choice

A variable that takes on the values of 0 or 1 and is used to incorporate the effect of qualitative variables in a regression model is called a(n) _____.

• A) interaction
• B) constant variable
• C) dummy variable
• D) None of the answers is correct.

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Definitions:

Permanent Income

A theory suggesting that people's consumption choices are more influenced by their expected long-term average income rather than by their current income.

Consumption Spending

Expenditures by individuals and households on goods and services for personal use.

Aggregate Supply

The total supply of goods and services that firms in an economy are willing and able to sell at a given price level in a specific period.

Government Purchases

Expenditures by the government on goods and services that directly increase the economy's productive capacity.