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Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985

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BuyFindarrow_forward

Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985
Textbook Problem

The government purchases 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.

To determine

Why transfer payments are not included in the GDP.

Explanation

The GDP is the summation of the monetary value of all the goods and services produced within the political boundary of a country, within a financial year. The expenditure is a main part of the GDP consideration because all the expenditures turn out to be someone’s income which can be calculated in the GDP. In this case of the transfer payments, they are not included in the GDP of the economy...

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