While estimating GDP by the expenditure method, which of the following is not included as expenditure on final goods and services produced in the current year?
Answer and explanation
Correct answer: Payment of an old-age pension by the government
An old-age pension is a transfer payment. It transfers purchasing power from the government to the recipient without the recipient supplying a currently produced good or service in return. Hence, it is not expenditure on current output and is excluded from GDP. A new bicycle is consumption, a new machine is investment, and foreign purchases of domestic software are exports.
Frequently asked questions
What is the correct answer to this question?
Payment of an old-age pension by the government
Why is this the correct answer?
An old-age pension is a transfer payment. It transfers purchasing power from the government to the recipient without the recipient supplying a currently produced good or service in return. Hence, it is not expenditure on current output and is excluded from GDP. A new bicycle is consumption, a new machine is investment, and foreign purchases of domestic software are exports.
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 - Expenditure Method.
Student feedback
Was this question useful?
👍 0 Helpful 👎 0 Not helpful
Yes 0% No 0%
0 responsesStudent Reviews
No published reviews yet.
