You are an economist working for a reputable private sector firm. Alternative energy sources have made

tremendous progress, and oil prices are forecasted to keep declining for the next 5 years. Oil supply

remains strong during that period. Assuming you are a citizen of a net oil-exporting economy, given

these circumstances, what would be the impact on:

Inflation

Private Consumption

Unemployment

Monetary Supply

Balance of Payments

Gross Domestic Product (Oil)

Gross Domestic Product (non-oil)

You have been called in as part of a panel to assist in developing policies concerning government

revenues and expenditures. The panel consists of officials from Finance, Energy & industry, and Strategic

Planning professionals. What would be your policy recommendation to each of them to ensure

economic prosperity considering declining oil prices? How would you ensure alignment between these

policies?

Bonus question

If you wanted to investigate what are the causes of declining oil prices, what variables would you use to

set up the equation? What would be your dependent and independent variables? How many variables

would you use? What is the minimum number of observations you would need to make this assessment

while ensuring there are no statistical biases?