Question:
Transfer payments differ from government purchases of goods and services because:
(1) they are included in GDP while purchases are not.
(2) they are not made in exchange for current production of goods or services.
(3) they are always larger than government purchases.
(4) they are paid only to foreign governments.
(5) they are used to finance the budget deficit.
Correct Answer:
(2)
Answer Explanation:
Transfer payments (like pensions or Samurdhi) are a redistribution of income without any corresponding production of goods or services. Therefore, they are excluded from GDP, unlike government purchases (G).
Topic: Fiscal Policy Year: 2024
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