Questions and Answers
What is a consequence of the hidden economy on legitimate businesses?
A decline in sales, leading to possible job losses
Why may the government increase spending on enforcement to curb the hidden economy?
To curb illegal activities and maintain law and order
What is a potential problem with products sold in the hidden economy?
They may be unsafe or harmful to consumers
How can the government reduce the size of the hidden economy?
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What is a consequence of a rise in the hidden economy on crime levels?
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What is the primary purpose of a patent?
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Which type of intellectual property applies to creative works?
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What is an example of a trademark?
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What is the primary characteristic of a trade secret?
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What is a common feature of intellectual property rights?
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Study Notes
Impact of the Hidden Economy
- Legitimate businesses suffer from declined sales, leading to potential job losses and reduced economic activity, resulting in lower tax revenue for the government.
- Uncollected VAT and excise duties on hidden economy goods and services hinder the provision of state services, forcing the government to cut spending or increase borrowing.
- Lack of regulation in the hidden economy leads to unsafe or harmful products and services, putting consumers at risk, e.g., alcohol or cigarettes.
Consequences of the Hidden Economy
- Increased crime levels instil fear in citizens, further reducing economic activity and legitimacy.
- Government expenditure on enforcement rises to combat the hidden economy, diverting resources from other essential areas, such as road checkpoints.
Curbing the Hidden Economy
- Implementing harsher fines and prison sentences can reduce the size of the hidden economy.
- Increasing resources for law enforcement and funding anti-hidden economy campaigns can help curb the problem.
- Lowering indirect taxes and labour taxes can discourage participation in the hidden economy.
Intellectual Property
- Intellectual Property encompasses four key categories: patents, trademarks, copyrights, and trade secrets.
Patents
- Grants the inventor exclusive rights to produce their invention.
- Protects innovations and creative solutions.
Trademarks
- Refers to brand names, logos, and slogans that distinguish a product or service.
- Examples include Coca-Cola and McDonald's.
Copyrights
- Applies to creative works such as literature, music, and art.
- Protects original expressions of ideas, not the ideas themselves.
Trade Secrets
- Refers to confidential and valuable information within a company.
- Examples include recipes, business methods, and software code.
- Not publicly disclosed, and only shared within the organization on a need-to-know basis.
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Description
This quiz assesses understanding of the effects of the hidden economy on legitimate businesses, tax revenue, and government spending. Topics include decline in sales, job losses, and provision of state services.
