The informal sector can be a significant drag on the economies of developing countries because the firms in the informal sector

Question

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The informal sector does not pay taxes to the government and therefore the government loses out on potential revenue. This lack of revenue can be a significant drag on the economy as it reduces the government's ability to invest in infrastructure, education, healthcare, and other key areas necessary for economic growth. Choices A, B, D, and E are not necessarily true for all firms in the informal sector and do not explain how the informal sector can be a drag on the economy.

The Informal Sector Can Be a Significant Drag on the Economies