One distinction between government purchases and transfer payments is that

A) purchase are exhaustive, whereas transfers are nonexhaustive.
B) purchase are nonexhaustive, whereas transfers are exhaustive.
C) purchases are part of total government spending, whereas transfers are not.
D) purchases are not part of total government spending, whereas transfers are.

Question

Aaron Terrett · Accepted Answer

Final Answer : A, Explanation :  Government purchases are considered exhaustive because they directly absorb resources and are part of the government's consumption of goods and services, contributing to the economy's aggregate demand. Transfer payments, on the other hand, are nonexhaustive because they do not directly absorb resources or contribute to the economy's aggregate demand in the same way; instead, they redistribute income.

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