How do transfer payments influence GDP and economic growth in the context of fiscal policy?

Transfer payments are funds given by the government to individuals without expecting anything in return, like unemployment benefits or social security. These payments increase the income of recipients, allowing them to spend more money on goods and services. When people spend this money, businesses earn more, which can lead to higher production and possibly more jobs. For example, if a family receives a government check and uses it to buy groceries, the grocery store makes more sales, contributing to GDP growth. Overall, while transfer payments do not directly count as part of GDP, they help stimulate the economy by increasing consumer spending, which can lead to economic growth.