Final answer:
Transfer payments are not accounted for in the consumption component of GDP, as they are not payments for goods or services and do not represent the economy's production level.
Step-by-step explanation:
The statement that transfer payments are accounted for in the consumption component of GDP is false. Transfer payments, such as Social Security, disability benefits, welfare, and unemployment compensation, are payments made by the government to individuals without the government receiving any goods or services in return. While these payments enable recipients to participate in the economy and may indirectly affect the consumption component, they are not counted as part of Gross Domestic Product (GDP) because they do not directly result in the production of new goods and services. GDP is calculated based on the sum of personal consumption expenditures, investment, government spending (excluding transfer payments), and net exports. Since the consumption expenditure by households constitutes about two-thirds of the GDP in any year, it's clear that actual spending decisions are a significant driver, unlike transfer payments, which are redistributions of money that do not reflect the economy's production level.