Transfer payment. A payment of money by the government to an individual that does not form part of an exchange but rather represents a gift without anything being received or required in return. Examples of transfer payments would include student scholarship grants, welfare checks, and social security benefits.

Transfer payments are, however, included in government current expenditures and total government expenditures, which are used for budgeting purposes.

Governments make direct purchase of goods and services. The federal government, for example, buys guns, bullets, tanks, and uniforms, etc. and pays soldiers to supply the national defense. Governments also make “transfer payments” such as welfare, Social Security, Medicare, Medicaid, and unemployment insurance.

Government transfer payments include Social Security benefits, unemployment insurance benefits, and welfare payments. Taxes are considered transfer payments.

Charitable donations of goods and money to qualified organizations can be deducted on your income taxes, lowering your taxable income. Deductions for charitable donations generally cannot exceed 60% of your adjusted gross income, though in some cases limits of 20%, 30% or 50% may apply.

A payment made or income received in which no goods or services are being paid for is called transfer payment. Hence, retirement pension is an example of a transfer payment.

Interest on public debt is part of Transfer payments by the government.

Unemployment Allowance is an example of transfer income. This is available to those persons who are not employed. It is not included in national income.

Leakages reduce the flow of income. Injection means introduction of income into the flow. Injections increase the flow of income. Injections can take the forms of investment, government spending and exports.

For example, in the Keynesian depiction of the circular flow of income and expenditure, leakages are the non-consumption uses of income, including saving, taxes, and imports. Savings, taxes, and imports are “leaked” out of the main flow, reducing the money available in the rest of the economy.

Leakages: The three leakages — saving, taxes, and imports — can be displayed by clicking the [Leakages”] button. These leakages, like consumption, are how the household sector divides up or uses its income. Most importantly, leakages subtract from the total volume of the basic circular flow.

Injections are variables in an economy that add to the circular flow of income, and include investment (I) government spending (G) and exports (X).

English Language Learners Definition of injection : the act or process of forcing a liquid medicine or drug into someone or something by using a special needle. : the act or process of forcing a liquid into something. : the addition of something (such as money) that is needed to support something.

Injections include investment spending, government spending and exports. When leakages equal injections, total spending will equal total output and the macroeconomy will be in equilibrium. If leakages exceed injections, then total output exceeds total spending and the level of national output (GDP) will fall.