Answer-The dummy variable trap occurs when

The Dummy Variable trap is a scenario in which the independent variables are multicollinear - a scenario in which two or more variables are highly correlated in simple terms one variable can be predicted from the others

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Question

The dummy variable trap occurs

when

A a dummy is not defined as zero or one

B There is multicollinearity among the independent variable

C the intercept is omitted

D There is autocorrelation

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The dummy variable trap occurs

Solution