Which of the Following Statements Is True

question 5

Multiple Choice

Which of the following statements is true?

• A) The method used in regression analysis for incorporating a categorical variable into the model is by organizing the categorical variable into one or more indicator variables.
• B) An indicator variable is a dependent variable whose value is set at either zero or one.
• C) There are four possible responses listed for marital status. Based on this, four indicator variables will need to be created and incorporated into the regression model.
• D) On a survey there is a question that asks whether someone lives in a house, apartment, or condominium. These three responses could be coded in an indicator variable using values of 0, 1, and 2.
• E) The scatterplot can show whether using an indicator variable in the model is appropriate. However, it gives no clue about using an interaction term.

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Definitions:

Price Elasticity

A parameter for gauging the response of demand to price variations of a product.

Excise Tax

A tax levied on the sale or consumption of specific goods or services, such as alcohol, tobacco, and gasoline.

Taxable Income

The amount of an individual's or corporation's income used to determine how much tax is owed to the government.

Progressive Income-tax

A tax system where the tax rate increases as the taxable amount increases, typically imposing higher taxes on higher income earners.