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What is the primary purpose of the Standard Industrial Classification?

1. Classification of businesses according to size

2. Classification of businesses according to income

3. Classification of business according to the type of activity performed

4. Classification of businesses based on geographical location

The correct answer is: Classification of business according to the type of activity performed

The primary purpose of the Standard Industrial Classification (SIC) system is to classify businesses according to the type of activity performed. This classification system organizes industries into categories based on their primary economic activities, which allows for a systematic way to collect, analyze, and report data about industries and economic activity within a nation. By categorizing businesses based on their activities, the SIC facilitates various applications, such as economic research, regulatory analysis, and policy development. This classification also aids in the comparison of industry data across different sectors, making it an essential tool for businesses, government agencies, and researchers to understand economic dynamics. The other options focus on different aspects of business categorization that are not the primary intention of the SIC. The classification of businesses according to size or income relates more to business metrics rather than their industrial activities, while geographical location is typically addressed by other classification systems rather than the SIC itself. Thus, classifying businesses by type of activity is the core function of the SIC.