Certified Residential Appraiser Practice Exam

What does the term 'Economic Base' refer to in the context of a community?

1. Providing local services

2. Overall wealth distribution

3. Attracting external income

4. Maintaining local markets

The correct answer is: Attracting external income

The term 'Economic Base' refers to the activities that provide a community with income from outside its local economic environment. This concept is crucial as it emphasizes the importance of attracting external income, which can come from various sectors such as manufacturing, tourism, or exports. This external revenue is vital because it supports local businesses and services, driving overall economic growth and development in the community. By focusing on attracting external income, a community can create jobs, stimulate investment, and foster a healthier economy. This means that communities that successfully develop and maintain a strong economic base are better positioned to withstand economic downturns, as they are not solely reliant on local consumer spending. In contrast, local services, wealth distribution, and maintaining local markets refer to aspects that are important within the community but do not directly encapsulate the concept of the economic base, which is explicitly linked to external sources of income.