A small economy has many unemployed workers and much unused capital. However, the unemployed workers have less work experience and education than those currently working. An increase in demand for this nation's output causes all firms in the economy to hire 10% more workers and lease 10% more capital.

The informal economy thrives in a context of high unemployment, underemployment, poverty, gender inequality and precarious work. It plays an important role, especially in respecting income generation, because it is easy to access and the levels of demand in education, qualifications, technology and capital are very low.

Explanation:

Most people do not enter the informal economy by choice, but by the need to survive and have access to activities that earn basic income. It is characterized by an acute deficit of decent work and a very large percentage of poor workers. These informal economy workers face more limited risks of poverty than workers in the formal economy.

Although some activities offer reasonable livelihoods and income, most people who work in the informal economy are exposed to inadequate working conditions and have high levels of illiteracy, and limited training opportunities