Many Arab countries have a larger underground sector of the economy relative to developed countries. What effect would this have on the GDP of Arab countries? Understate (reduce) the GDP of Arab countries,
Ob It has no effect on measuring the GDP of Arab countries.
Overstate (increase) the GDP of Arab countries.
C
None of the above,

Understate (reduce) the GDP of Arab countries,

Explanation:

Underground economy simply refers to the trade which involves goods and services that the government of a particular country isn't aware of or trading involving illegal activities.

We should note that the underground activities are not added to the gross domestic product of countries. This, therefore leads to a reduction in the GDP of such countries. In this case, there'll be an understatement of the GDP of the Arab countries.

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