Answer: $ x_t = b_0 + b_1x_{t-1} + b_2x_{t-2} + \varepsilon_t $

The correct answer is B because an autoregressive model of order 2 (AR(2)) includes two lagged values of the dependent variable. Model B contains $x_{t-1}$ and $x_{t-2}$, which makes it an AR(2) process. Model A is AR(1), Model C is AR(3), and Model D is not a proper autoregressive model as it lacks lagged dependent variables.

Author: Nikitesh Somanthe