CEA Policy Evaluation and Analysis 2

Question 1

Which evaluation design is considered the 'gold standard' for establishing causal policy impact?

Accepted Answer

Randomized controlled trial

Answer

Randomized controlled trials randomly assign units to treatment and control groups, eliminating selection bias and establishing true causal inference.

Question 2

A regression discontinuity design (RDD) identifies causal effects by exploiting:

Accepted Answer

A threshold rule that determines treatment eligibility

Answer

RDD compares outcomes for units just above and just below a cutoff threshold, treating assignment near the threshold as quasi-random.

Question 3

In cost-benefit analysis, the 'shadow price' of a non-marketed good refers to:

Accepted Answer

The implicit value derived from revealed or stated preferences

Answer

Shadow prices capture the social opportunity cost or willingness to pay for goods without observable market prices, using revealed or stated preference methods.

Question 4

The 'displacement effect' in program evaluation refers to:

Accepted Answer

Program benefits crowding out private-sector activity

Answer

Displacement occurs when subsidized jobs or activity simply replace unsubsidized equivalents, reducing net social gain from the program.

Question 5

Which of the following best describes an 'instrumental variable' in policy evaluation?

Accepted Answer

A variable correlated with treatment but not directly with the outcome

Answer

An instrument is correlated with the endogenous treatment variable but affects the outcome only through its effect on treatment, satisfying the exclusion restriction.

(CEA) Certified Economic Analyst Practice Test

(CEA) Certified Economic Analyst Practice Test

CEA Policy Evaluation and Analysis 2