Explain why the government spending component of GDP falls short of actual (total) government outlays or expenditures?

The government spending component of Gross Domestic Product falls short of total government expenditure because GDP measures the amount spent on goods and services. It does not, therefore, include transfer payments made by the government, such as social security.

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Gross Domestic Product can be calculated in several ways, the most common of which is by market value. If the GDP of Ruritania for 2019 is $100 billion, therefore, this means that the total market value of all goods and services produced within the borders of Ruritania in 2019 was $100 billion. However, another way of calculating GDP is by spending. In this model, all the spending on goods and services in...

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