PRC-3 · Chapter 13 · Question 44 of 50
When calculating the Gross National Product (GNP), why are government 'Transfer Payments' (such as state pensions or welfare checks) strictly excluded?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Because they represent payments given without any actual physical work or new production of goods
Explanation
Transfer payments merely redistribute existing wealth. They are not compensation for current economic production and adding them would falsely inflate the GDP.
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