Which of the Following Statements About the Underground Economy and How

question 90

Multiple Choice

Which of the following statements about the underground economy and how it relates to GDP is correct?

• A)Activity in the underground economy in Canada is estimated at over 25% of the value of GDP,which therefore significantly understates total output.
• B)Transactions in the underground economy are not legal,are not reported for tax purposes,and therefore not included in GDP.
• C)Transactions in the underground economy are legal but are not reported for tax purposes,and therefore not included in GDP.
• D)Activity in the underground economy is illegal and therefore should not be included in any measure of legitimate economic activity.
• E)Transactions in the underground economy are legal and therefore an estimate of their total value is included in GDP.

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Definitions:

Cost Price Approach

An approach to transfer pricing that uses cost as the basis for setting the transfer price.

Transfer Price

The price charged one decentralized unit by another for the goods or services provided.

Transfer Pricing

The pricing of goods, services, and intangibles between related legal entities within an enterprise to optimize tax liabilities and profit allocation.

Division Manager

An individual responsible for overseeing a specific division within a company, ensuring its operational and financial performance.