Order the following steps to explain why transfer payments are excluded from GDP calculations: A) Transfer payments are received by individuals without any exchange of goods or services. B) GDP measures economic production and the provision of goods and services. C) Including transfer payments would inflate GDP figures inaccurately. D) Therefore, transfer payments do not reflect actual economic activity.

To understand why transfer payments are excluded from GDP calculations, we start by recognizing that GDP measures economic production and the provision of goods and services. Transfer payments, like social security or welfare, are received by individuals without any exchange of goods or services. Including these payments in GDP would inflate the figures inaccurately, as they do not represent actual production. Therefore, transfer payments do not reflect real economic activity and are left out of GDP calculations. For example, if the government gives someone unemployment benefits, this money does not represent the creation of goods or services, so it isn’t counted in GDP.