Which transaction would be included in government spending (G)?

Question

BlackTom AI · Accepted Answer

Consider what counts as government spending (G) in the national accounts. 
Option a: Construction of a new highway. This is a government purchase of goods and services and counts as part of government spending (G) because it involves government expenditure on infrastructure, which directly adds to government consumption/investment.
Option b: Unemployment benefits. These are transfer payments. They do not represent a purchase of goods or services by the government; instead, they are transfers to individuals funded by taxes, so they are not included in G.
Option c: Social Security payments to retirees. Like unemployment benefits, Social Security is a transfer program that transfers income without the government acquiring goods or services in return, so this is not counted in G.
Option d: Interest payments on government debt. Interest payments are the cost of servicing debt, not purchases of goods or services. They are treated separately in the national accounts and do not count toward G.
In summary, only option a involves the government purchasing goods/services, while the others are transfers or debt service and are not included in government spending (G).

EC301 Principles of Macroeconomics

Which transaction would be included in government spending (G)?

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