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:

Present Value

The current value of a future sum of money or stream of cash flows given a specified rate of return, used in discounting and investment appraisal.

Bond Discount Account

An accounting term representing the difference between the face value of a bond and its selling price when sold at less than its face value.

Serial Bonds

Bonds that mature at different intervals over a period of time, allowing the issuer to retire a portion of the bond issue at regular intervals.

Present Value

The immediate value of a future stream of income or lump sums of money, assessed with a specific interest rate in mind.