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 government implements a carbon tax. Which evaluation framework best captures both market efficiency gains and distributional equity concerns?
Answer: Multi-criteria analysis incorporating efficiency and equity metrics
Multi-criteria analysis explicitly weighs both efficiency and distributional outcomes, making it superior for policies with trade-offs between these goals.
When a forecaster says the 90% confidence interval for GDP growth is [-0.5%, 3.5%], this primarily communicates:
Answer: The uncertainty surrounding the point estimate
Confidence intervals express the uncertainty around a forecast, not certainty; a 90% CI means 90% of such intervals would contain the true value in repeated sampling.
The 'counterfactual' in policy evaluation refers to:
Answer: What would have happened in the absence of the policy
The counterfactual is the hypothetical baseline—what outcomes would have been without the intervention—used to isolate policy effects.
In a difference-in-differences (DiD) analysis, the parallel trends assumption requires that:
Answer: Both groups would have followed the same trend absent treatment
Parallel trends assumes control and treatment groups would have evolved similarly over time without the intervention, validating the counterfactual.
Which leading economic indicator is most useful for forecasting consumer spending 6 months ahead?
Answer: Consumer confidence index
The consumer confidence index leads consumer spending because it captures households' forward-looking sentiment about income and job security.
Regulatory impact analysis (RIA) is designed primarily to:
Answer: Assess anticipated costs and benefits before a rule is finalized
RIA is an ex-ante tool that quantifies expected costs and benefits to inform regulatory decisions before rules take effect.
A structural break in a time-series model used for inflation forecasting most likely signals:
Answer: A permanent change in the underlying economic relationship
Structural breaks indicate that the parameters governing a relationship have shifted permanently, requiring model re-estimation or regime switching.