Hi everyone, I was hoping someone could help with the question attached.
I'm having an issue creating an equation independent of t-1, my answer is completely different to the one in the back of the book.
the formula pt is of the form yt=ayt-1 + b
so the time independent term b/(1-a) is k(3-2pt-1)/1-(1+r)
I then put this value into the formula for the solution of a first order linear recurrence equation.
But the answer in the book is something totally different.