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:

Price Elasticity

An economic metric indicating the responsiveness of the demand for a product or service to variations in its price.

Peck

A unit of volume for dry goods, historically used in agriculture and equal to about 8.809 or 9 liters in the US and UK respectively.

Bushel

A unit of volume that is used for measuring agricultural commodities, varying in actual volume by the product being measured.

Consumption

The use of goods and services by households or individuals for personal satisfaction or to fulfill needs.