Question

1. What does the term ‘shadow economy’ mean? 2. How does the shadow economy affect GDP in different countries? 3. What are the main factors influencing the shadow economy? 4. Why is the shadow economy a challenge for the governments? 5. Reflection – the students also should include a paragraph in the initial response in their own words reflecting on specifically what they learned from the assignment and how they think they could apply what they learned in the workplace.

Answer 1

1. Shadow economy also known as underground economy is the part of an economy that includes illegal economic activities that takes place alongside a country's legal economy. Shadow economy involves goods and services being paid in for cash. It also involves employment of workers who are paid via cash only and therefore neither employee nor employer are taxed throughout the year, as the money made or loss throughout the year is not tracked.