Question

What do economists mean when they say government purchases are ""exhaustive"" expenditures whereas government transfer payments are ""nonexhaustive"" expenditures? Cite an example of agovernment purchase and a government transfer payment

Answer 1

Explained below.

Step-by-step explanation:

Exhaustive expenditures are for products that directly absorb resources and are part of domestic output – the “exhaust” or use resources. Nonexhaustive expenditures do not undeviatingly consume resources either generate output, they simply transfer ownership concerning financial resources.

Government purchases include building bridges, buying tanks and missiles, and hiring troops and teachers. Transfer payments include welfare checks, social security payments, and subsidies to large corporations.