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Subjects · Leaving Cert Economics

Leaving Cert Economics: The hidden economy

How often The hidden economy comes up on the Economics papers, every year it was asked, and questions to try.

HL Asked on 3 of the last 5 Higher Level papers, most recently in 2024. most years

OL Asked on 2 of the last 5 Ordinary Level papers, most recently in 2023.

The hidden economy, Higher Level(7 marks)

Quick ones on The hidden economy.

(a)The hidden (black) economy is…
  1. The output of Irish-owned firms operating in other countries
  2. Economic activity not declared to the tax authorities
  3. Exports of services such as software and tourism
(b)Which is a cost of a large hidden economy to the State?
  1. More accurate national income figures
  2. Higher VAT receipts
  3. Lost tax revenue
(c)Which measure would most likely shrink the hidden economy?
  1. Cutting tax on labour-intensive services
  2. Encouraging cash-only payments for services
  3. Raising income tax rates on workers
Show the answers

(a) Economic activity not declared to the tax authorities

(b) Lost tax revenue

(c) Cutting tax on labour-intensive services

Your turn: Higher Level questions on The hidden economy.

Higher Level

Asked on 3 of the last 5 Higher Level papers, most recently in 2024. most years

Every paper, year by year

YearWhere it came up
2025Not asked
2024Q12
2023Q13
2022Q8
2021Not asked

Links open the State Examinations Commission’s paper for that year.

More The hidden economy questions

The hidden economy, 3 marks

A large hidden economy affects honest taxpayers because…

  1. They pay less tax overall
  2. They receive extra public services free
  3. They carry a heavier share of the tax burden
Show the answer

They carry a heavier share of the tax burden

Revenue lost on undeclared activity must be made up by higher taxes on those who comply, or by cuts to the public services everyone uses.

Ordinary Level

Asked on 2 of the last 5 Ordinary Level papers, most recently in 2023.

Every paper, year by year

YearWhere it came up
2025Not asked
2024Not asked
2023Q11
2022Q16
2021Not asked

Links open the State Examinations Commission’s paper for that year.

More The hidden economy questions

The hidden economy, 2 marks

The hidden (black) economy is?

  1. Spending by foreign tourists visiting Ireland
  2. Output of state-owned companies such as utilities
  3. Economic activity not declared to Revenue
Show the answer

Economic activity not declared to Revenue

The hidden economy is work and trade not declared to Revenue, often cash-in-hand, to avoid tax. It is left out of the official national income figures.

The hidden economy, 3 marks

Which is a result of a large hidden economy?

  1. Better protection of workers' rights
  2. Less tax revenue for the state
  3. Higher official GDP figures
Show the answer

Less tax revenue for the state

Undeclared income is not taxed, so the state loses revenue and honest taxpayers carry more. Official GDP is understated, and hidden workers lack protections like sick pay.

The hidden economy, 3 marks

Why is a large hidden economy unfair to honest firms?

  1. Firms that avoid tax can undercut them on price
  2. Honest firms pay no tax at all on their profits
  3. Honest firms get extra grants from the State
Show the answer

Firms that avoid tax can undercut them on price

A business that hides income saves on tax and can charge less. Firms that follow the rules lose customers, and the state loses revenue.

Other Economics topics

All of Leaving Cert Economics