The existence of the underground economy causes gross domestic product (GDP) statistics to _____.

A) understate the true volume of economic activity
B) overstate the aggregate price level in the economy
C) overstate the standard of living
D) overstate the profit of firms
E) understate government spending in an economy

Underground Economy

Economic activity that occurs outside of government regulation and taxation, including both illegal activities and unreported income from legal sources.

Gross Domestic Product

The collective market or monetary value of all final products and services created within a nation's territory in a specific duration.

Economic Activity

Economic activity encompasses all actions that involve the production, distribution, and consumption of goods and services in an economy.