Question

1. explain why transfer payments ( social security cheks written by the government), are not counted in GDP.

2. Explain how GDP measures our total income and our total production ( explain how the income approach relates to the expenditure approach).

Answer 1

1. No, the U.S. definition of gross domestic product (GDP) does not include social security payments. Payments for social security are transfers that are not included. However, once they are used to buy something, they are counted as personal consumption expenses (PCE). Because of this, it would be twice the same cash to count Social Security payments given by the state to the recipient.

Government spending does not include transfer payments when calculating GDP (reallocating cash from one party to another), such as Social Security payments, Medicare, unemployment insurance, welfare programs, and subsidies. They do not constitute a type of final demand, also known as GDP, because these are not payments for products or services.

2. Gross Domestic Product (GDP) is the complete financial or market value of all finished goods and services generated in a particular time series within the # # the of a country. It acts as a wide measure of national general manufacturing as a detailed scorecard of the financial health of the country.

Total production is measured by GDP, the value of all final goods and services produced in an economy over a period of time. By calculating GDP, when we evaluate the value of complete manufacturing in the economy, we evaluate the value of total revenue at the same time. GDP is split into four main expenditure classifications: consumption, investment, public purchases, and net exports. We can also calculate GDP by adding any company engaged in the production of final goods and services to the added value.