Which of the following exchanges are not included in the calculation of GDP?Group of answer choicesUnderground activities; both legal and illegalGovernment expendituresTransfer paymentsBoth A and C
Question
Which of the following exchanges are not included in the calculation of GDP?Group of answer choicesUnderground activities; both legal and illegalGovernment expendituresTransfer paymentsBoth A and C
Solution
The exchanges that are not included in the calculation of GDP are:
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Underground activities: These are economic activities that are not reported to the government. They can be both legal (like cash jobs where income is not reported) and illegal (like drug trafficking or smuggling). These activities are not included in GDP because they are not reported and therefore, cannot be accurately measured.
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Transfer payments: These are payments made by the government to individuals without any goods or services being provided in return. Examples include social security benefits, unemployment benefits, and welfare payments. These are not included in GDP because they do not represent production of new goods and services.
Therefore, the answer is "Both A and C".
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