ECONOMICS
GDP
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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To encourage formation of small businesses, the government could provide subsidies; these subsidies
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would be included in GDP because they are part of government purchases.
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would not be included in GDP because the government raises taxes to pay for them.
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would not be included in GDP because they are transfer payments.
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would be included in GDP as an increase in investment and a decrease in taxes.
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would be included in GDP because they are part of investment expenditures.
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Explanation:
Detailed explanation-1: -Transfer payments are payments by the government to individuals, such as Social Security. Transfers are not included in GDP, because they do not represent production.
Detailed explanation-2: -Consumption expenditure by households is the largest component of GDP, accounting for more than two-thirds of the GDP in any year.
Detailed explanation-3: -Government purchases range from spending on infrastructure projects and paying civil service and public service employees, to buying office software and equipment and maintaining public buildings. Transfer payments, which do not involve purchases, are not included in this category.
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