Assume That the Size of the Underground Economy Increases Both

question 158

Multiple Choice

Assume that the size of the underground economy increases both absolutely and relatively over time. As a result,

• A) real GDP will rise more rapidly than nominal GDP.
• B) GDP will tend to increasingly understate the level of output through time.
• C) GDP will tend to increasingly overstate the level of output through time.
• D) the accuracy of GDP will be unaffected through time.

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Definitions:

Net Income

The amount of money a business keeps as profit after all expenditures, taxes, and costs are deducted from its aggregate revenue.

Preferred Dividends

Dividends that are allocated and paid to preferred shareholders before any dividends can be issued to common shareholders.

Operating Expenses

Costs that a business incurs through its normal business operations, excluding cost of goods sold.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including materials, labor, and manufacturing overhead.