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Chapter 8: Q.2 - For Critical Thinking (page 182)

How do you suppose that differing levels of government business regulations and varying levels of enforcement of those regulations might affect the size of the underground economy? Explain your reasoning.

Short Answer

Expert verified

To lessen the degree of underground economies the public authority should authorize the economy and force more punishments for tax avoidance and criminal operations

Step by step solution

01

introduction

In the underground economy, the specialists attempt to swindle the public authority by dodging charges, exchanging taken products, drug managing and assembling, betting and pirating. So it will make a low assessment base.

02

explanation

Estimating the size of the underground economy is almost incomprehensible, the market analysts can tell about the normal size of the economy. This equal economy makes the measurements less trustworthy like the Unemployment rate, Inflation, etc. Concentrates additionally note that country where there are high expense rates will generally have bigger underground economies as well as the other way around; an expansion in the size of underground economies will make less income for the economy.

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Most popular questions from this chapter

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

Explain the expenditure and income approaches to tabulating GDP.

Each year after a regular spring cleaning, Maria spruces up her home a little by retexturing and repainting the walls of one room in her house. In a given year, she spends \(25on magazines to get ideas about wall textures and paint shades, \)45on newly produced texturing materials and tools, \(35on new paintbrushes and other painting equipment, and \)175on newly produced paint. Normally, she preps the walls, a service that a professional walltexturing specialist would charge \(200to do, and applies two coats of paint, a service that a painter would charge \)350to do, on her own.

a. When she purchases her usual set of materials and does all the work on her home by herself in a given spring, how much does Maria's annual spring texturing and painting activity contribute to GDP?

b. Suppose that Maria hurt her back this year and is recovering from surgery. Her surgeon has instructed her not to do any texturing work, but he has given her the go-ahead to paint a room as long as she is cautious. Thus, she buys all the equipment required to both texture and paint a room. She hires someone else to do the texturing work but does the painting herself. How much would her spring painting activity add to GDP?

c. As a follow-up to part (b), suppose that as soon as Maria bends down to dip her brush into the paint, she realizes that painting will be too hard on her back after all. She decides to hire someone else to do all the work using the materials she has already purchased. In this case, how much will her spring painting activity contribute to GDP?

Discuss the key components of national income.

Why might a range of dashboard economic indicators be difficult to include in one single measure such as GDP?
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