PAC PAC Economic & Fiscal Policy Analysis

Question 1

Which analytical technique compares the total benefits of a policy to its total costs, expressed in monetary terms, to determine net value to society?

Accepted Answer

Cost-benefit analysis

Answer

Cost-benefit analysis (CBA) monetizes both benefits and costs to calculate net present value and assess whether a policy produces positive social returns.

Question 2

In fiscal policy analysis, 'crowding out' refers to:

Accepted Answer

Government borrowing raising interest rates and reducing private investment

Answer

Crowding out occurs when government deficit spending competes with private borrowers for funds, driving up interest rates and suppressing private-sector investment.

Question 3

A policy analyst is evaluating a job creation tax credit. Which outcome measure most directly tests whether the credit caused new jobs to be created?

Accepted Answer

The net increase in employment attributable to the credit after accounting for jobs that would have been created anyway

Answer

Evaluating additionality—jobs created above the counterfactual baseline—is essential to determine whether the credit caused employment growth or simply subsidized jobs that would have appeared anyway.

Question 4

Which budget baseline concept is most commonly used in the US federal budget process to score the cost of new legislation?

Accepted Answer

Current law (CBO) baseline

Answer

The Congressional Budget Office (CBO) scores legislation against its current law baseline, which projects spending and revenues under existing law over a 10-year window.

Question 5

An analyst reviewing a proposed housing subsidy notes that it would reduce housing costs for recipients but increase rents in surrounding areas. This negative effect on non-recipients is called:

Accepted Answer

A negative externality or market spillover

Answer

When a policy produces costs borne by parties not directly involved (non-recipients experiencing rent increases), those effects are negative externalities.

(PAC) Policy Analyst Certification Practice Test

(PAC) Policy Analyst Certification Practice Test

PAC PAC Economic & Fiscal Policy Analysis