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What is the effect on welfare analysis if the black economy is not fully captured in NNP?

Answer and explanation

Correct answer: The official picture of income and welfare may remain incomplete

The black economy includes production and income that are not reported in official records. If these activities are missing from NNP, measured national income may be lower than the income actually generated. Welfare comparisons based only on NNP may therefore be incomplete or misleading; NNP is not a complete measure of welfare.

Related tags

Black EconomyNnpWelfareGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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