Author Question: Which of the following transactions would take place in the underground economy? A) Matt bought ... (Read 93 times)

Charlie · **on:** Jun 29, 2018

Which of the following transactions would take place in the underground economy?

A) Matt bought an iPad for 499 but decided to sell it on eBay instead of keeping it.
B) Elizabeth tells her mother she's going to work but really goes to see a movie.
C) Paul buys 15 gallons of gasoline for 3.29 a gallon, not realizing that 1.50 per gallon of that price goes to the government as tax revenue.
D) John makes chain-link belts and necklaces and sells them at a local flea market for cash to avoid paying taxes.

Question 2

If banks pay deposit insurance premiums to the Federal Deposit Insurance Corporation that are less than the amount that they would have to pay if the insurance were privately provided

what kind of behavioral problem might this cause on the part of banks?

SeanoH09 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

D

Answer to Question 2

It is likely to cause banks to be less careful with their depositors' money than they otherwise would be if the true cost of their risky loan-making were born by them rather than the government.