Policy Evaluation & Economic Forecasting Flashcards
7 cards from real CEA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Policy Evaluation & Economic Forecasting flashcards as text
A regression discontinuity design (RDD) is valid for policy evaluation only when:
Answer: Assignment to treatment is determined by crossing a known threshold and agents cannot precisely manipulate the running variable
RDD exploits a sharp eligibility cutoff to mimic randomization, but its validity requires that units near the threshold cannot precisely sort themselves above or below it.
Nowcasting in economic analysis refers to:
Answer: Real-time estimation of current economic conditions using high-frequency data before official statistics are released
Nowcasting uses real-time, high-frequency indicators (credit card transactions, shipping data) to estimate current GDP before official releases.
If a policy analyst finds a statistically significant but economically trivial effect (e.g., p < 0.001, effect size = 0.02%), the appropriate conclusion is:
Answer: The effect is reliably detected but too small to justify substantial policy investment
Statistical significance indicates the effect is distinguishable from zero, but economic significance—the practical magnitude—must also be evaluated for policy relevance.
The Beveridge Curve plots the relationship between:
Answer: Job vacancy rate and unemployment rate
The Beveridge Curve shows the negative relationship between job openings and unemployment, and is used to assess labor market matching efficiency and policy effectiveness.
In computable general equilibrium (CGE) modeling, a trade policy shock is simulated by:
Answer: Changing tariff parameters and solving for the new market-clearing equilibrium across all sectors simultaneously
CGE models capture economy-wide interactions by simultaneously solving for equilibrium in all markets after the policy shock alters relative prices.
A government program shows positive outcomes in a randomized pilot but fails to replicate at national scale. This 'scaling failure' is most likely due to:
Answer: General equilibrium effects, site-selection bias, or implementation challenges absent in the pilot
Pilots often operate in favorable conditions with hand-picked sites and staff; at scale, GE price effects, heterogeneous populations, and weaker implementation reduce impact.
Which forecasting approach explicitly models uncertainty by simulating thousands of possible future paths based on random shocks?
Answer: Monte Carlo simulation
Monte Carlo simulation generates a distribution of outcomes by repeatedly drawing random shocks and propagating them through a model, quantifying the full range of uncertainty.