The expanding “underground” economy creates problems for economic policy makers. Explain
What will be an ideal response?
An expanding underground economy means that much current production is escaping measurement and GDP figures will be correspondingly understated. This can cause economists to advocate expansionary policies when the economy may be actually growing quite rapidly. Such policies could then have harmful effects on economic stability by over correcting nonexistent problems.
You might also like to view...
Constant returns to scale occur when the firm's long-run
a. total costs are constant as output increases. b. average total costs are constant as output increases. c. average cost curve is falling as output increases. d. average cost curve is rising as output increases.
Scarcity exists because
A) the majority of people in the world are poor. B) people are too greedy and refuse to share what they have with others. C) human wants exceed what can be produced with the limited resources available. D) not enough new technology is being used to eliminate scarcity.