Question

transfer payments are excluded when calculating the gdp because: a. they reflect inflation b. they do not reflect current production c. they are not a category of investment spending d. they increase spending of recipients.

Answer 1

Transfer payments are not included in GDP calculations because they do not represent the production of new goods or services within a country. The correct answer is option: b. they do not reflect current production.

Step-by-step explanation:

Transfer payments are excluded when calculating the Gross Domestic Product (GDP) because they do not reflect current production of goods and services within an economy.

Essentially, transfer payments such as Social Security, disability payments, welfare, and unemployment compensation are redistributions of money by the government to individuals without receiving any goods or services in return.

These payments allow recipients to participate in the economy, but since no new production is created as a direct result of these payments, they are not included in the measurement of GDP.