Assume that as a government auditor you have been asked to evaluate an energy growth model. The model relies on historical data and uses econometric techniques to estimate the parameters in the various equations. The model has one or more energy-use and price variables among the dependent variables. It includes income, capital costs, imports, and government expenditures among the primary independent variables. The model includes an assumption about the responsiveness of energy use to price change.
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What questions should you ask yourself in evaluating the model?