Transfer payments refer to payments made by the government that are not made to purchase a good or service. This includes payments to individuals or groups for social welfare programs, subsidies, and grants. They are not included in the government expenditure category in gross domestic product because they are not payments for goods/services that contribute to GDP.

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Transfer Payments

Question 108

Multiple Choice

Transfer payments

A) are made by households to firms in exchange for goods and services.
B) are included in the government expenditure category in gross domestic product.
C) refer to payments made by the government that are not made to purchase a good or service.
D) refer to all payments made to households by governments.

Correct Answer: