Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Social Security benefits
B
Government spending on infrastructure
C
Wages paid to government employees
D
Business investments in new equipment
Understanding the Answer
Let's break down why this is correct
Answer
A transfer payment is money given by the government to individuals without expecting anything in return, and it does not directly add to the economy's total output, or GDP. For example, when the government pays unemployment benefits to people who have lost their jobs, this money helps those individuals but does not count as part of the GDP because it is not payment for goods or services. Instead, it is a way to support people during tough times. Although these payments help boost spending in the economy, they are not included in GDP calculations since they do not represent production. Therefore, while transfer payments are important for social welfare, they do not contribute to the overall economic output measured by GDP.
Detailed Explanation
Transfer payments, like Social Security, give money to people without getting goods or services in return. Other options are incorrect because Some might think all government spending is a transfer payment; It's easy to confuse wages with transfer payments.
Key Concepts
Transfer payments
Topic
Transfer Payments and GDP
Difficulty
easy level question
Cognitive Level
understand
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