While estimating GDP at market price by the expenditure method, which of the following is not included in current final expenditure?
Answer and explanation
Correct answer: Government payment as an old-age pension
An old-age pension is a transfer payment. It transfers purchasing power from the government to a household, but the government does not receive a currently produced good or service in return. Therefore, the pension itself is excluded from current final expenditure and GDP. By contrast, a new car is private final consumption, a new machine is investment, and newly purchased textbooks for public schools represent government expenditure on current goods and services.
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What is the correct answer to this question?
Government payment as an old-age pension
Why is this the correct answer?
An old-age pension is a transfer payment. It transfers purchasing power from the government to a household, but the government does not receive a currently produced good or service in return. Therefore, the pension itself is excluded from current final expenditure and GDP. By contrast, a new car is private final consumption, a new machine is investment, and newly purchased textbooks for public schools represent government expenditure on current goods and services.
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.
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