The Italian government collects a smaller amount of the taxes it is owed than the U.S.government.Other things being equal,
A)U.S.and Italian GDP should be equal.
B)U.S.GDP may be higher than Italian GDP.
C)U.S.GDP should be lower than Italian GDP.
D)U.S.residents are better off than Italian residents.

Question

Quizplus · Accepted Answer

The lower amount of tax collection in Italy implies a higher level of tax evasion, which could lead to a lower level of government revenue, lower infrastructure and public services, and lower economic growth. This suggests that the Italian GDP may be lower than the U.S. GDP, where tax collection is more efficient. Therefore, the correct choice is B.

The Italian Government Collects a Smaller Amount of the Taxes