Which of the following best describes the purpose of the North American Industry Classification System (NAICS) in economics?

• A. It regulates international trade agreements.
• B. It provides a common framework for classifying businesses and industries.
• C. It determines the exchange rates between the US, Canada, and Mexico.
• D. It sets monetary policy for North American countries.

Answer: (B)

Verified step by step guidance

1. Understand that the North American Industry Classification System (NAICS) is a system used in economics and business to categorize and organize industries and businesses based on their economic activities.
2. Recognize that NAICS is not involved in regulating trade agreements, setting exchange rates, or determining monetary policy, as these functions are handled by other institutions and mechanisms.
3. Focus on the role of NAICS as a standardized framework that allows for consistent classification of businesses across the US, Canada, and Mexico, facilitating economic analysis and comparison.
4. Recall that having a common classification system helps governments, researchers, and businesses to collect, analyze, and share economic data effectively.
5. Conclude that the primary purpose of NAICS is to provide a common framework for classifying businesses and industries, which supports economic research and policy-making.