Suppose that the government collects $3 million in taxes, pays $2 million in Employment Insurance benefits, pays $0.5 million in interest on the national debt, and pays workers $1 million to sit at their desks and work as little as possible. The government's contribution to GDP is

Question

Quizplus · Accepted Answer

The government's contribution to GDP is the value of goods and services it produces, which in this case is the $1 million paid to workers, as it represents government spending on services. Other payments like interest and benefits are transfers, not production.

Suppose That the Government Collects $3 Million in Taxes, Pays