Question: (a) Plot and draw the time series for each stochastic equation below. (i) Y t = a t -0.5a t-1 (ii) Y t -

(a) Plot and draw the time series for each stochastic equation below.

(i) Yt = at -0.5at-1

(ii) Yt - 1.2 Yt-1 +0.2 Yt-2= at

(iii) Yt= 20-0.7t + at

(b) Explain the reasons to take the log differences rather than the differenced original series modelling the stochastic term in the series.

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