American Institute of Certified Planners (AICP) Practice Exam

What analysis involves the examination of the relationship between two or more variables in an economy?

1. Correlational Analysis

2. Economic Base Analysis

3. Input-Output Economic Analysis

4. Shift-Share Analysis

The correct answer is: Input-Output Economic Analysis

The correct answer focuses on Input-Output Economic Analysis, which examines the interactions between different sectors of an economy. This analysis helps in understanding how the output from one industry can serve as input for another, illustrating the flow of goods and services. It provides insights into how changes in one sector might influence others and allows planners to assess the economic implications of various scenarios, such as policy changes or shifts in demand. Input-Output Economic Analysis utilizes a matrix to represent the interdependencies, making it a powerful tool for examining multiple variables simultaneously. This is particularly valuable for economic planning and forecasting as it highlights both direct and indirect relationships within an economy. Other analysis types mentioned may also reflect relationships between variables, but they serve different purposes. Correlational Analysis focuses on the statistical correlation between two variables without necessarily establishing a causal relationship. Economic Base Analysis is more about understanding how an economy generates income through exports and local consumption without examining detailed inter-sector relationships. Shift-Share Analysis primarily analyzes regional economic growth by breaking it down into components attributable to national trends, industry growth, and local effects, rather than the complex interdependencies captured in Input-Output Economic Analysis.