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The government purchase component of GDP does not include spending on transfer payments such as Social Security. Thinking about the definition of GDP, explain why transfer payments are excluded.

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Anne Gillian Duero
Anne Gillian DueroLv10
28 Oct 2020
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Related questions

The government purchases component of GDP does not include spending on transfer payments such as Social Security. GDP does not also include the value of used goods that are resold. Do you think such exclusion make GDP a less informative measure of economic well-being? What other production of goods and services do you think are excluded from the GDP? What is the impact of such exclusion on the economic welfare?

Explain whether transfer payments, such as Social Security and unemployment compensation, are counted as government spending in calculating GDP.

MACROECONOMIC PRINCIPLES Gross Domestic Product (GDP) is the market value of all final goods and services produced within a country in a given period of time.

A) Name the contents of the four components of expenditure.

B) What is meant by nominal GDP; how does it differ from real GDP and how is the latter calculated?

C) The government portion of expenditures in the GDP does not include spending on transfer payments such as Social Security. Why are they excluded? (See page 202 in the textbook, 7th edition; 8th edition page196)

D) Give reasons as to why a higher GDP can be assumed to engender greater well-being in the people whose endeavors attained this elevation. Alternatively, explain why a larger GDP appears not to make people any happier.

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