Question

Q. In the context of the Indian economy, which of the following constitute the “Transfer payments” for a household?

Select the correct answer using the codes given below:

• A.
  1, 2 and 3 only
• B.
  2, 3 and 4 only
• C.
  1 and 4 only
• D.
  1, 2, 3 and 4

Answer 1

The correct option is A

1, 2 and 3 only
Explanation:

Statement 1, 2 and 3 are correct: Transfer payments constitute the payments in the form of grants, allowances, pensions etc by the government to the people such as pensioners, widows, students, sick, unemployed people etc to give support in the times of distress. Here it is to be noted that these payments produce no productive service from the beneficiaries to the government in return.

Statement 4 is incorrect: Undistributed profit means a part of the profit that is not distributed among the factors of production by the company. Hence, it is not a part of the transfer payments.