Which income will be treated as transfer income in the income method?
Answer and explanation
Correct answer: Unemployment allowance
Unemployment allowance is received without the recipient supplying a current productive service in exchange. It is therefore a transfer receipt rather than payment for a factor of production, and it is excluded from factor income in the income method. Wages reward labour, rent rewards the use of land or property, and interest rewards capital. Hence, option A is correct.
Frequently asked questions
What is the correct answer to this question?
Unemployment allowance
Why is this the correct answer?
Unemployment allowance is received without the recipient supplying a current productive service in exchange. It is therefore a transfer receipt rather than payment for a factor of production, and it is excluded from factor income in the income method. Wages reward labour, rent rewards the use of land or property, and interest rewards capital. Hence, option A is correct.
Which subject and chapter does this question cover?
This is a Class 12 Economics question. Chapter: National Income and Related Aggregates. Topic: Methods of calculating national income - Income Method.
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