While estimating GDP by the expenditure method, which item is not included in final expenditure because it does not represent current production?
Answer and explanation
Correct answer: Government payment of an old-age pension
An old-age pension is a transfer payment: the recipient receives income without supplying a currently produced good or service in return. The payment itself is therefore excluded from GDP expenditure. A new bicycle is consumption, a new machine is investment, and exports are included because they represent current domestic production sold abroad.
Frequently asked questions
What is the correct answer to this question?
Government payment of an old-age pension
Why is this the correct answer?
An old-age pension is a transfer payment: the recipient receives income without supplying a currently produced good or service in return. The payment itself is therefore excluded from GDP expenditure. A new bicycle is consumption, a new machine is investment, and exports are included because they represent current domestic production sold abroad.
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.
