Response:
Three.
Detailed explanation:
An analyst aims to integrate Level of Education into a regression model.
This variable has four categories: HS, BS, MS, PHD.
The number of dummy variables needed is:
Given 4 categories, (4 - 1 = 3) dummy variables will suffice for the model.
If M represents a dummy variable, where 1 signifies the presence of a specific education level and 0 its absence;
M1 = 1 for HS, 0 otherwise
M2 = 1 for BS, 0 otherwise
M3 = 1 for MS, 0 otherwise
When M1, M2, and M3 are all 0, the value of PHD is implied.