The U.S.government pays an economist at the U.S.Department of Commerce $50,000 in salary in 2006.The economist then retires.In 2007,the government pays him $30,000 in retirement benefits.Which of the following is correct?

Question

Quizplus · Accepted Answer

The 2006 payment of $50,000 is included in 2006 GDP as government purchases since it represents the value of the economist's services during that year. However, the 2007 payment of $30,000 is not included in 2007 GDP because it does not represent the purchase of any goods or services. Instead, it is a transfer payment, which is a payment made by the government that does not result in the production of goods or services. Therefore, it is not included in GDP.

The USGovernment Pays an Economist at the U