Question

An example of a transfer payment is Question 13 options: A) pensions paid from the Canada Pension Plan. B) government payments of salaries to Members of Parliament. C) government payments of salaries to schoolteachers. D) private firms' payments of dividends. E) government spending on military equipment

Answer 1

Transfer payment is a kind of payment against which no goods and services are produced. These are also called unilateral payments. Social security payments by the government are example of transfer payments.

Pensions paid from the Canada pension plan is an example of transfer payment since no goods and services are produced against the payment of this pension.

Payment of salaries to members of parliament or school teachers will not be a transfer payment because this is paid for a service which member of parliament or school teachers provide.

Government spending on military equipment is a payment against the goods used by military. Private forms payment of dividend is a factor income given to to the shareholders which provide capital. Hence, this is also not transfer payment.

Hence an example of transfer payment is pensions paid from the Canada pension plan.

Therefore option A is correct.