Why are transfer payments not included in GDP?
Answer and explanation
Correct answer: Because no current production is received in return
A transfer payment, such as a pension, scholarship, or certain welfare benefit, reallocates purchasing power from one person or institution to another. It is not payment for a currently produced good or service. Including it in GDP would therefore count an income transfer rather than current production. The goods bought later may be included when produced and sold.
Frequently asked questions
What is the correct answer to this question?
Because no current production is received in return
Why is this the correct answer?
A transfer payment, such as a pension, scholarship, or certain welfare benefit, reallocates purchasing power from one person or institution to another. It is not payment for a currently produced good or service. Including it in GDP would therefore count an income transfer rather than current production. The goods bought later may be included when produced and sold.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates.
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