What are transfer payments in Macroeconomics class 12 CBSE Board

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transfer payments is a very important topic in national income chapter of macroeconomics class 12 CBSE Board

I will discuss definition, types and few examples of transfer payments in this article in detail.

Define Transfer Payments

A transfer is a transaction in which the payers provide a good, service, or asset without receiving from the recipient any good, service, or asset in return.

It is a payment without any quid pro quo.

Transfer Payments Example

1) Gift to anybody even for employees.
2) payment of tax to the Government.
3) Donations, charity by the government to the people.
4) Scholarships to students.
5) Payment of pocket money to children
6) donations from foreign governments
7) Winnings from lotteries, prizes.

Note:- Transfer Payments are not included in calculating national income.

Types of Transfer Payments

Transfer payments are of two types current transfer and capital transfer. let’s understand both concept one by one.

Definition of Current Transfers

Current Transfers:- A transfer made out of the current income of the payer and added to the current income of the recipient is called a current transfer.

Types of Current Transfers

Current transfers are of two types. current transfers ‘within the country’ and ‘between two countries’.

1. within the country from one resident to another

1) tax
2) Donations
3) scholarships
4) unemployment allowance
5) old age pensions
6) gifts
7) winning of lottery prizes

2. Between two countries by the residents of one country to another country

1) help in the form of donations
2) transfer of money from household to household by relatives residing abroad.

Definition of Capital Transfer

Capital Transfers:- A transfer made out of wealth or capital of the payer and gets added to the wealth or capital of the resident is called a capital transfer.

Types of Capital Transfer

Capital transfer are ‘within the country’ and ‘Between two countries’.

Examples of Capital Transfer

1. within the country

1) Capital Grants
2) lump sum payments to households affected by natural calamities,
3) Payments of taxes on capital & wealth

2. Between two countries

1) International Grants
2) War Damages

Further Reading

1.What is Macroeconomics
2.What are Goods in economics
3.What are Consumption Goods
4.What are capital goods
5.What are intermediate Goods
6.What is intermediate consumption
7.What are final Goods
8.What is Final Consumption
9.What is investment in economics
10. What is stock and flow
11.What are transfer payments
12.What is circular flow of income
13.What is Domestic Territory of a Country
14.What is normal resident of a country
15.Nominal GDP and Real GDP
1.What is GDP Deflator
2.What are externalities in economics
3.Limitations of GDP as a measure of welfare
1.Items to be included in National income
2.Items to be included in Domestic Income
1.National Income and Related Aggregates, formula, Definition, process
2.Value added Method, formula, Definition, process
3.Income Method, formula, Definition, process
4.Expenditure Method, formula, Definition, process
1.150+ Numerical of Value Added Method
2.150+ Numerical of Income Method
3.150+ Numerical of Expenditure Method
4. 150+ Numerical of National Income and related aggregates
1.250+ MCQs of National Income
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Anurag Pathak

Anurag Pathak is an academic teacher. He has been teaching Accountancy and Economics for CBSE students for the last 18 years. In his guidance, thousands of students have secured good marks in their board exams and legacy is still going on. You can subscribe his youtube channel and can download the Android & ios app for free lectures.

Articles: 2015

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