CEA Policy Evaluation & Economic Forecasting 5

Question 1

A regression discontinuity design (RDD) is valid for policy evaluation only when:

Accepted Answer

Assignment to treatment is determined by crossing a known threshold and agents cannot precisely manipulate the running variable

Answer

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.

Question 2

Nowcasting in economic analysis refers to:

Accepted Answer

Real-time estimation of current economic conditions using high-frequency data before official statistics are released

Answer

Nowcasting uses real-time, high-frequency indicators (credit card transactions, shipping data) to estimate current GDP before official releases.

Question 3

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:

Accepted Answer

The effect is reliably detected but too small to justify substantial policy investment

Answer

Statistical significance indicates the effect is distinguishable from zero, but economic significance—the practical magnitude—must also be evaluated for policy relevance.

Question 4

The Beveridge Curve plots the relationship between:

Accepted Answer

Job vacancy rate and unemployment rate

Answer

The Beveridge Curve shows the negative relationship between job openings and unemployment, and is used to assess labor market matching efficiency and policy effectiveness.

Question 5

In computable general equilibrium (CGE) modeling, a trade policy shock is simulated by:

Accepted Answer

Changing tariff parameters and solving for the new market-clearing equilibrium across all sectors simultaneously

Answer

CGE models capture economy-wide interactions by simultaneously solving for equilibrium in all markets after the policy shock alters relative prices.

(CEA) Certified Economic Analyst Practice Test

(CEA) Certified Economic Analyst Practice Test

CEA Policy Evaluation & Economic Forecasting 5