Transfer payments are excluded from government purchases and GDP because they do not directly reflect the production of goods and services. They are payments made by the government for which it does not receive a new good or service in return, such as social security payments or unemployment benefits.

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Transfer Payments

Question 44

Multiple Choice

Transfer payments

A) are excluded from GDP but included in government purchases.
B) are excluded from government purchases and GDP.
C) are included in government purchases and in GDP.
D) are excluded from government purchases but included in GDP.
E) are included in government purchases but excluded from GDP.

Correct Answer: