Government's Contribution to GDP Calculation

Suppose that the government collects $3 million in taxes...

In the provided scenario, the government's contribution to GDP is derived from the $1 million spent on worker salaries, even if they are minimally productive. Social security benefits and interest payments on national debt are not factored into the GDP as they are not direct government expenditures.

Explanation:

Given the scenario that the government collects $3 million in taxes, pays $2 million in social security benefits, pays $0.5 million in interest on the national debt, and pays workers $1 million to idly sit at their desks, in order to calculate the government's contribution to GDP, look at government spending. GDP, or Gross Domestic Product, is calculated as Consumption + Investment + Government spending + (Exports - Imports).

However, it's important to note that not all types of government spending represent a direct contribution to GDP. Specifically, social security benefits and interest payments on national debt are transfers or interest payments, not direct government expenditures on goods or services. In this case, the actual government spending that directly contributes to GDP is the $1 million it pays to workers, even if they're not being particularly productive.

Therefore, the government's contribution to GDP in this scenario is: C) $1 million.