The size of underground economies differs across countries. In Greece it has been estimated to be as big as 30 percent of GDP, in Spain 25 percent, in Italy 20 percent, and in the United States, about 7 percent. Given this information, official GDP measures understate true economic activity the most in:

Why do you supposed that it is easier for a government to protect and maintain a domestic monopoly for a particular industry but next to impossible to accomplish if this firm operates internationally?

What will be an ideal response?

Refer to Figure 4.4. At an interest rate of 7%,

A) Foreign borrowers have an incentive to offer lenders in the United States an interest rate greater than 7%. B) Foreign lenders have an incentive to offer borrowers in the United States an interest rate less than 7%. C) U.S. lenders have an incentive to offer borrowers in the rest of the world an interest rate of 7%. D) U.S. borrowers have an incentive to offer U.S. lenders an interest rate greater than 7%.