Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 8: Q.1 - For Critical Thinking (page 182)

Why do you suppose that there is a positive relationship between nations' tax rates and the relative size of their underground economies?

Short Answer

Expert verified

The general size of the tax rate is the primary justification for the underground economy. hence there is a positive relationship between nations' tax rates and the relative size of their underground economies.

Step by step solution

01

introduction

The underground economy is one which the nations need to stay away from. Families which produce labour and products for their own purposes are specialists of the casual economy and not unlawful specialists.

02

explanation

The general size of the tax rate is the primary justification for the underground economy.

An expansion in the size of the underground economy can prompt low government incomes which thusly, can lessen the amount and nature of the government's labour and products. A further developed and better open assistance can decrease the size of the underground economy. One more justification behind underground economic exercises is the expanded power of unofficial law; it can essentially decrease the opportunity of individuals so they go with their decision to underground economies.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Based on the information in Table8.3, in what years was the economy in a recession? Explain briefly.

Consider Figure 8-4. Explain what is special about the year at which the two data plots cross, and why this is so.

Consider the following table for the economy of a nation whose residents produce four final goods.

Assuming a 2018base year:

a. What is nominal GDP for 2019 and 2020?

b. What is real GDP for 2019and 2020?

Define GDP and explain its limitations

Suppose that early in a year, a hurricane hits a town in Florida and destroys a substantial number of homes. A portion of this stock of housing, which had a market value of \(100 million (not including the market value of the land), was uninsured. The owners of the residences spent a total of \)5 million during the rest of the year to pay salvage companies to help them save their remaining belongings. A small percentage of uninsured owners had sufficient resources to spend a total of \(15million during the year to pay construction companies to rebuild their homes. Some were able to devote their own time, the opportunity cost of which was valued at \)3 million, to work on rebuilding their homes. The remaining people, however, chose to sell their land at its market value and abandon the remains of their houses. What was the combined effect of these transactions on GDP for this year? (Hint: Which transactions took place in the markets for final goods and services?) In what ways, if any, does the effect on GDP reflect a loss in welfare for these individuals?
See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free