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Transfer payments such as pensions and social assistance are not included in
government spending because they do not represent payment for goods or services.
4.6.2 Role of Government Spending
Government spending helps provide public services, increase demand, and reduce
unemployment during recessions.
4.7 Foreign Sector Spending (Net Exports)
Exports are goods and services produced locally and sold abroad. They increase national
income.
Imports are goods and services produced abroad and bought locally. They are
subtracted because they are not produced domestically.
Net exports equal exports minus imports and may be positive or negative.
4.8 Importance of the Spending Approach
The spending approach helps measure national income, analyze economic activity,
understand demand, and design economic policies.
4.9 Link with the Output Approach
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