Which of the Following Is the Most Likely Side Effect

question 95

Multiple Choice

Which of the following is the most likely side effect of an increase in the relative size of the underground economy with the passage of time?

• A) The growth rate of real GDP will tend to understate the growth rate of total output.
• B) The growth rate of real GDP will tend to overstate the growth rate of total output.
• C) The GDP deflator will tend to overstate any increase in inflation.
• D) The GDP deflator will tend to understate any increase in inflation.

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Definitions:

Marginal Cost

The financial outlay involved in the manufacture of one more unit of a product or service.

Monopoly Power

The capacity of a firm to control market prices and exclude competition, often by being the sole provider of a product or service.

Barriers to Entry

Barriers that make it difficult for new entrants to join a market or business sector.

Average Total Cost Curve

Depicts the per-unit total cost of production (fixed cost plus variable cost) divided by the quantity of output produced.