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JAMB Economics 2006 Question 4

Question 4

National Income

In computing national income, transfers are excluded because

  1. A.they are received only by the poor
  2. B.the figures reduce the size of national income
  3. C.it is difficult to get the exact figures
  4. D.they are not payments for productive activities
Show the answer and explanation

Answer: D (they are not payments for productive activities)

Explanation

Transfer payments such as pensions and gifts are not earned by producing goods or services, so counting them would overstate national output.