Underground economic Assignment Example | Topics and Well Written Essays - 500 words - 1

Underground economic - Assignment ExampleFor example, nobody will admit that they are in drug business or how much money they make in the vile trade causing the method to be wide due to the inaccurate information supplied by the respondents.b. Discrepancies in official statistics estimate of underground deliverance domiciliate also be done by comparing the statistics in topic accounting. Ideally, total income must be equal to total final expenditures. If there is an excess of expenditures over incomes, this indicates the size the underground economy. This is based on a viridity sense that one cannot spend more than one earns. So the extra money that was spent is assumed to have come in the underground economy in the discrepancies in official statistics approach.Another estimate that can be done using discrepancies in official statistics is to check labor statistics. A descent in dinner gown employment or labor participation indicates that the number of people in underground economy is increasing as workers are migrating from formal to informal employment.c. Monetary approaches the monetary approach recognizes that underground economy transacts only in cash to avoid paper trail that could detect and trace their illegal activities. The extent of the size of the underground economy can be estimated by analyzing the money supply (composed of cash and bank deposits) whether it has increased or decreased. An increase in money supply without the reported transactions or any visible economic activities indicate the existence of an underground economy. The value of the underground economy can then be extrapolated by comparing the value of money supply (cash on hand and bank deposits) to reported transactions in a given over economy. The discrepancy between the value of money supply and reported transactions will give an estimate of the size of underground