American Institute of Certified Planners (AICP) Practice Exam

Which method combines information on suppliers and purchasers for economic forecasting?

1. Shift-Share Analysis

2. Step-Down Ratio Method

3. Input-output analysis

4. Cohort Survival Method

The correct answer is: Input-output analysis

Input-output analysis is a method that combines information on suppliers and purchasers, making it particularly useful for economic forecasting. This technique involves constructing a matrix that details the interdependencies between different sectors of an economy, showing how the output from one industry can serve as input to another. By analyzing these relationships, planners can predict how changes in one sector will affect the others, providing a comprehensive overview that can inform economic strategies and policies. This method’s strength lies in its ability to account for both direct and indirect economic impacts, allowing for a more nuanced understanding of an economy's structure. For instance, if a particular industry is expected to grow, input-output analysis would help forecast not only the direct effects on that sector but also the ripple effects on suppliers providing materials and the purchasers of the products. The other methods listed focus on different aspects of economic analysis. Shift-share analysis typically breaks down changes in employment or output into components that can help identify regional competitiveness but does not holistically integrate supplier and purchaser data like input-output analysis. The step-down ratio method is used in budgeting or resource allocation, focusing on overhead costs rather than economic interrelations. The cohort survival method primarily deals with demographics, tracking survival rates of specific cohorts over time, rather than analyzing economic flows. Thus