Question

​"Since transfer payments by government are not associated with the production of goods and services, they are not included in GDP"A. TrueB. False

Answer 1

A. True

Step-by-step explanation:

Transfer payments are made by one party to another. The party giving the payments doesn't receive anything in return from the recipient.

Transfer payments by the government include social welfare expenditure like retirement benefits being given and donation to a particular country etc. Thus, these payments by government are not associated with the production of goods and services and hence, are not included in GDP of a nation.

Answer 2

true

Step-by-step explanation:

The transfer payment comprises of both a donor as well as a receiver, with the sender giving up something that is of worth and receiving anything in return, unlike the swap agreement that equally benefits all the parties concerned.

Transfer payments cover Social Security, Medicaid, unemployment compensation, social programs and assistance. They should not be added in GDP, as they are not payments for goods or services, but rather ways to distribute money for social purposes.