Question

In 100 words or more, explain why activities in so-called underground economy are excluded in the calculation of GDP. Enter your word count at the end of your essay.

Answer 1

We have provided goods and services with real value. However, because they are informal, in-kind payments, they are not counted as part of the GDP. In most countries, the black market, as well as barter transactions, are ignored by government statisticians and, as such, are not part of GDP estimates

Sales of used goods and sales from inventories of goods that were produced in previous years are excluded. Only goods that are produced and sold legally, in addition, are included within our GDP. That means that goods produced illegally are not counted.

Illegal and unreported economic activity: While goods such as illegal drugs, gambling, and prostitution are sold in markets, the transactions are hidden for obvious reasons. 2. Home production and bartered goods/services: If cash doesn't change hands, the transaction will not be included in GDP