Question

Question 17 are composed of markets in which goods or services are traded illegally. 0 In-cash transfers O Government-monitored transactions 0 Illegitimate operations O under-the-table economies O Underground economies

Answer 1

Solution:

Correct option is (e) Underground Economies. Underground economies are composed of markets in which goods or services are traded illegally.

Let's look at all other options separately, and see why they're wrong.

a) In-cash transfers: are the transfers or payments made from one (individual or group) to other (individual or group) in cash. Such cash transfers are noticed in any market and for day-to-day activities. They may help in evading taxes (since, transactions do not involve banks here, so taxes may not be monitored properly), but does not necessarily involve illegal trade of goods or services. Hence, the option is incorrect.

b) Government-monitored transactions: As the name itself suggests, the transactions are monitored by the government, so they are not expected to be illegal, or in non-accordance with the law. So, illegal trade is not an evident practice under this case, hence it is an incorrect option.

c) Illegitimate operations: Of course, since the operations are illegitimate, they are not governed by law. Even though the trade practices here might be illegal, the term 'operations' here refers to activity which itself is a part of the market. We are interested in knowing not the meaning (or other name) of such illegal trade, but the 'term' where such activities are undertaken. In whole, the option doesn't serve exactly what is asked for (especially, when we have a better option in hand), hence it is incorrect.

d) Under-the-table economies: comprises of economies where practices are undertaken to hide or show a lower income, in order to be saved from paying heavy taxes (a task of tax evasion). It doesn't precisely include trade practices which are illegal due to the illegitimate goods or services involved, but only due to transactions not complying entirely with law (since transactions are shown to be of lower amount than actual amount). Thus, this gives an incomplete answer to the question, and cannot be claimed to be the correct option.

e) Underground economies: definition is itself that trade of goods or services is illegal either because goods or services involved are illegal, or because trade takes place in an illegal manner or because the transactions and the way of transfers of these do not comply with law. This is the best suiting option comparatively, thereby making it our correct option.