The existence of the underground economy causes gross domestic product (GDP)statistics to _____.
A)understate the true volume of economic activity
B)overstate the aggregate price level in the economy
C)overstate the standard of living
D)overstate the profit of firms
E)understate government spending in an economy

Question

Quizplus · Accepted Answer

The underground economy includes activities that are not accounted for in official economic statistics, such as the production and sale of illegal goods or services, unreported income, and informal work. Since the underground economy is not included in GDP calculations, the official GDP statistics are understating the true volume of economic activity.

The Existence of the Underground Economy Causes Gross Domestic Product