American Institute of Certified Planners (AICP) Practice Exam

What are the principal advantages of NAICS codes over the SIC codes they replaced?

1. Relevance and identification of new industries

2. Consistency in classification principles

3. Comparability across US, Canada, and Mexico

4. All of the above

The correct answer is: All of the above

The NAICS (North American Industry Classification System) codes provide several principal advantages over the older Standard Industrial Classification (SIC) system, which is why selecting all of them is considered a comprehensive response. One advantage of NAICS codes is their relevance and identification of new industries. As economies evolve and new sectors emerge, NAICS includes these contemporary industries, reflecting changes in the economy more accurately. This adaptability ensures that industry classifications remain pertinent to current market dynamics and technological advancements. Additionally, NAICS offers greater consistency in classification principles. It uses a hierarchical structure that is more systematic, which enhances clarity in classifying industries based on their processes and products. This organization helps users of the classification system to understand their position within the economic landscape more easily. Moreover, NAICS ensures comparability across the US, Canada, and Mexico. This tri-national standardization facilitates international trade and economic analysis by establishing a common framework. Users can engage in better economic comparisons and collaborations across borders because the same coding is applied in these three countries. These combined attributes underscore the effectiveness and utility of NAICS as a modern classification tool, thus justifying the selection of all the provided advantages.