Which of the Following Correctly States Concerns About Stationarity for the Following

question 13

Multiple Choice

Which of the following correctly states concerns about stationarity for the following model:
Y_t = $\gamma$ Y_t-1 + $\beta$ ₀ + $\beta$ ₁X_t + $\varepsilon$ _t

• A) If \(\gamma\)\(\lt\)1, the model is stationary and spurious regression results are likely.
• B) If \(\gamma\)=1, the model will "blow up" as Y will get larger and larger in every period.
• C) If \(\gamma\) \(\gt\)1, the model will "blow up" as Y will get larger and larger in every period.
• D) If \(\gamma\)=1, the model is stationary and spurious regression results are likely.

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Definitions:

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