A Tax on Productive Activity Tends to

Multiple Choice

A tax on productive activity tends to

A) increase formal market activity because it decreases prices
B) decrease formal market activity because it increases work incentives
C) decrease formal market activity because it lowers the return on such activity
D) decrease activity in the underground economy because people are afraid of being connected with tax fraud
E) increase activity in the underground economy because people are afraid of being connected with tax fraud