The size of the underground economy is larger when:

Question

Quizplus · Accepted Answer

All of these statements are true, and they are all factors that contribute to the size of the underground economy. When the cost of doing business legally is high, such as compliance costs with regulations and licensing requirements, businesses may opt to operate underground without registering or obtaining necessary permits. Bureaucratic red tape may also push businesses to operate in the shadows, resulting in bribes that increase the cost of doing business. High taxes may cause individuals and businesses to underreport their income or transactions to avoid paying taxes, thereby growing the underground economy.

The Size of the Underground Economy Is Larger When