Question

In many places, certain parts of the economy, like open markets, plumbing businesses, renovation businesses, etc., are unregulated, operate without paying taxes, and do not offer any insurance to the employees. People that operate in this type of economy belong to the:

a) Informal economy
b) Formal economy
c) Mixed economy
d) Subsistence economy

Answer 1

The mentioned workers are part of the informal economy, which is significant globally and plays a crucial role in supporting livelihoods, especially in peripheral nations.

Step-by-step explanation:

The workers referred to in the question — such as open market vendors, plumbers, and renovation specialists operating without formal regulations or paying taxes — are part of the informal economy. This sector also includes unlicensed cab drivers in cities like New York, piecework seamstresses in Mumbai, and street food vendors in Mexico City.

The informal economy is a significant part of the global economic system, especially in peripheral and semi-peripheral nations, and it provides essential income for many, especially during economic downturns. While it comes with certain risks and lacks the protections of the formal economy, such as insurance and government oversight, it plays a crucial role in supporting livelihoods. Therefore, the correct answer to the student's question is: a) Informal economy.