Which of the following best describes character variables in SAS?

Character variables in SAS are indeed declared with a dollar sign ($), which is a fundamental aspect of how SAS differentiates between character and numeric data types. When you define a character variable in a DATA step or a PROC step, including the dollar sign allows SAS to recognize that the variable will hold textual data or strings, which can include letters, symbols, and numbers treated as text.

This signaling is crucial because SAS uses this information to properly allocate memory and store the data accordingly. For instance, if you declare a variable as 'Name $' for a character variable, SAS understands that this variable is meant to hold names which may include letters as well as numeric characters in a string format, not as numeric values.

The other choices represent misconceptions about character variables. Character variables can contain not only letters but also numbers as part of a string. They are not limited to being stored in numeric format, and they can indeed have labels associated with them. In SAS, labels can be applied to character variables just as they can to numeric variables, enhancing the clarity of data presentation and interpretation.