What describes the part of the economy that is taxed and monitored by the government?

The formal sector refers to the part of the economy that operates under legal frameworks, complies with government regulations, and is subject to taxation and monitoring. This includes businesses that are registered and adhere to labor laws, taxation laws, and other regulatory requirements.

In the formal sector, transactions are recorded, and businesses can access various benefits, such as legal protection and the ability to engage with public contracts. This sector is vital for the economies of countries because it contributes to government revenue through taxes and helps maintain a structured economy.

In contrast, the informal sector consists of economic activities that are not monitored or regulated by the government, often resulting in a lack of taxation. The underground economy refers to illegal or unreported economic activities, whereas the global economy encompasses economic interactions that transcend national borders but do not specifically describe a taxed sector.