American Institute of Certified Planners (AICP) Practice Exam

What is the relationship between the export ratio and community size?

1. Larger communities have a smaller export ratio

2. Smaller communities have a larger export ratio

3. Larger communities provide larger economic multipliers

4. Community size has no effect on the export ratio

The correct answer is: Larger communities provide larger economic multipliers

The export ratio refers to the proportion of goods and services produced in a community that are sold outside its boundaries, which can influence the local economy. The answer indicating that larger communities provide larger economic multipliers is correct because larger communities typically have more diverse economies and a greater range of businesses that can produce goods and services for export. This increased production capacity allows for economies of scale and more robust economic activity. Economic multipliers reflect how spending in a community circulates and generates additional economic activity. In larger communities, the larger population base and concentration of businesses mean that there is more spending, which generates greater economic impact. When a larger community exports goods, that income tends to circulate within the local economy more significantly, thereby amplifying the economic benefits. In contrast, smaller communities often have limited production capacity and fewer businesses, which may lead to a smaller export ratio and a less pronounced economic multiplier effect. Thus, while smaller communities might export some goods effectively, they generally cannot create as extensive an economic ripple effect as larger communities can. The relationship between community size and economic multipliers is pivotal in planning and economic development considerations, as urban planners often seek to stimulate exports and create a more favorable environment for larger economic impacts by fostering growth in community size and diversity.