Question

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 _________.

Answer 1

Greece

Step-by-step explanation:

The underground economy includes activities that are not taxed or regulated, generally known as black market activities. This classification includes a broad range of activities such as a babysitter not paying taxes, many self-employment activities, activities carried out by illegal aliens, illegal services like prostitution, selling of forged goods, to selling of illegal drugs or weapons.

What classifies an activity as part of the black market is that the person that carries them out doesn't pay taxes, or doesn't pay full taxes for them. The larger the black market, the more money a government loses in uncollected taxes. It is very difficult to measure the GDP properly if the relative weight of these activities in the economy is high, since a single person may perform illegal activities but uses the proceeds to purchase legal products.

Answer 2

Official GDP measures understate true economy activities in GREECE.

Step-by-step explanation:

Underground economies are basically economies from illicit activities and conducts. Simply put, black market.

Greece has a substantial part of its GDP from this unlike the other countries so stated. The underground GDP is at variance with the real GDP, and thus GREECE is the most understated.