American Institute of Certified Planners (AICP) Practice Exam

What is the primary focus of economic base analysis?

1. To predict future economic trends

2. To analyze historical economic data

3. To measure the impact of local industries

4. To forecast real estate values

The correct answer is: To analyze historical economic data

The primary focus of economic base analysis is to assess the economic activities that drive a region's economy, especially in terms of understanding which industries contribute significantly to employment and income. This analysis looks at the relationship between the local economy and external factors, identifying key sectors that bring in revenues from outside the region and understanding their dynamics. While examining historical economic data is part of economic base analysis, the purpose extends beyond just analyzing past trends. This analysis involves looking at present data to ascertain the existing economic structure and how various sectors interact, which can then inform future planning decisions. It plays a critical role in community and regional planning by helping planners identify strengths and weaknesses in the local economy. The other choices focus on aspects that do not encapsulate the primary goal of economic base analysis. Predicting future economic trends involves projections that consider the potential changes over time rather than just current data. Measuring the impact of local industries and forecasting real estate values are also important but are typically more specific analyses that may stem from an understanding of the economic base rather than the main focus itself. In essence, economic base analysis serves as a foundational tool for understanding the economic drivers that must be maintained or enhanced for regional stability and growth.