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    Question

    Which of the following statements about transfer

    payments are correct? 1) Transfer payments are made by the government to households. 2) Pension, scholarship etc. are not a part of the transfer payments. 3) Transfer payments are often used as a means of redistributing income within a society.
    A 1, 2 and 3 Correct Answer Incorrect Answer
    B 2 and 3 only Correct Answer Incorrect Answer
    C 1 and 2 only Correct Answer Incorrect Answer
    D 1 and 3 only Correct Answer Incorrect Answer

    Solution

    1) Transfer payments are made by the government to households.-     Correct . Transfer payments typically involve the government distributing money to individuals or households without requiring any goods or services in return. Examples include welfare benefits, social security, and unemployment benefits. 2) Pension, scholarship, etc. are not a part of the transfer payments.   Incorrect . Pensions and scholarships are indeed examples of transfer payments. These are funds given to individuals without any direct exchange of goods or services. Pensions, for example, are paid to retirees, often as part of government social security programs, while scholarships provide financial support for students, both typically without requiring any work or service in exchange. 3) Transfer payments are often used as a means of redistributing income within a society.- Thus, statements 1 and 3 are correct about transfer payments.   Correct . One of the primary functions of transfer payments is to redistribute income to promote social equity. By transferring money from general revenues to individuals who are less economically advantaged, governments can help reduce poverty and support economic stability among vulnerable groups.

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