4th Question
Consider the model
y_t = .7 y_{t-1} +.2 y_{t-1} + \epsilon_t
where \epsilon_t is forcing
a. Take the homogeneous equation and solve it and discuss the
stability of the system
b. Write in lag operator form and solve the quadratic in L. Compare
the results with a.
c. Using L notation, rewrite the difference equation and solve for y_t