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Help in solving this questions A moving average (stochastic) process, X,, has a discrete time domain and a continuous state space and is defined as:

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A moving average (stochastic) process, X,, has a discrete time domain and a continuous state space and is defined as: where {Z, meZ, are independent and identically distributed N(0,o?) random variables and of, (2, 0, are constants. (i) Prove that X, is weakly stationary. [5] (ii) Explain whether the Markov property holds. [2] (iii) Deduce whether the process has independent increments. [1] [Total 8]Read parts (i) to (iii) before answering the question. (1) Draw a diagram to illustrate the labour market. Label the demand curve for labour AD, , the labour force curve as A and the job acceptance curve AS, . [1] (ii) Mark on your diagram a point A where the labour market is in equilibrium. Label the equilibrium wage rate w and the equilibrium level of employment N. [1] (iii) Mark on your diagram the distance which represents the equilibrium (or natural) level of unemployment and label it UN. [1] [Total 3]

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