📚 Learning Guide
Transfer Payments and GDP
easy

Which of the following is an example of a transfer payment that does not directly contribute to GDP?

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Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
Explore Topic

Choose 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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