Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Transfer payments do not involve the production of goods or services.
B
Transfer payments are counted as government spending, which boosts GDP.
C
Transfer payments are only temporary and therefore excluded from GDP.
D
Transfer payments are considered income and are always included in GDP.
Understanding the Answer
Let's break down why this is correct
Answer
Unemployment benefits are payments made by the government to people who are out of work, but they do not count towards the Gross Domestic Product (GDP) because they are considered transfer payments. Transfer payments are funds given to individuals without any exchange of goods or services in return. Since GDP measures the total value of all goods and services produced in a country, only payments made for production are included. For example, if Maria receives unemployment benefits, the government is not producing anything in exchange for that money; they are simply providing support. Therefore, while these benefits help individuals like Maria during tough times, they do not reflect economic activity and are excluded from GDP calculations.
Detailed Explanation
Transfer payments, like unemployment benefits, are money given without any goods or services being produced. Other options are incorrect because This answer suggests that all government spending counts towards GDP; This answer assumes that temporary payments are excluded.
Key Concepts
Transfer Payments
Gross Domestic Product (GDP)
Economic Stability
Topic
Transfer Payments and GDP
Difficulty
easy level question
Cognitive Level
understand
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