Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Personal savings are to national income
B
Sales taxes are to consumer spending
C
Government investments are to public goods
D
Charitable donations are to private sector production
Understanding the Answer
Let's break down why this is correct
Answer
Transfer payments, like social security or unemployment benefits, are money given by the government to individuals without expecting anything in return. These payments do not count toward Gross Domestic Product (GDP) because they are not payments for goods or services produced. Instead, they help people but do not directly contribute to economic production. In this context, the best comparison is option C, where government investments are related to public goods, as both involve government actions that affect the economy but do not directly add to GDP. For example, when the government builds a road, it contributes to GDP, but when it gives money to someone for living expenses, that does not count as part of the economic output.
Detailed Explanation
Transfer payments, like welfare, help people but don't count in GDP. Other options are incorrect because Some might think savings are like transfer payments; Sales taxes are added costs when buying things.
Key Concepts
Transfer Payments
Gross Domestic Product (GDP)
Economic Production
Topic
Transfer Payments and GDP
Difficulty
medium level question
Cognitive Level
understand
Ready to Master More Topics?
Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.