PRC-3 · Chapter 13 · Question 26 of 50
When calculating National Income, a government unemployment welfare cheque is strictly excluded from the calculation. Why?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Because it is a 'transfer payment' with no corresponding production of goods or services
Explanation
Transfer payments (like pensions and welfare) are just re-distributions of existing wealth via taxes; they do not represent new economic production and are excluded from GDP.
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