In an open economy, the national income (Y) of the economy is: (C, I, G, X, M stands for Consumption, Investment, Govt. Expenditure, total exports and total imports respectively.

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Correct answer: Y = C + I + G + (X – M). In an open economy, national income (Y) is determined by the sum of domestic consumption (C), investment (I), gov- ernment spending (G), and net exports (X - M), where exports (X) contribute positively to income, and imports (M) reduce it. The standard macroeconomic equation for national income in an open economy is : Y = C+I+G+(X−M). This formula accounts for domestic economic activity as well as international trade. Net exports (X - M) adjust income by subtracting the value of imports, ensuring only domestically produced goods and services contribute to national income. As per the International Monetary Fund (IMF) Macroeconomic Framework, this equation is widely used in national income ac- counting for open economies, including India. 289

In an open economy, the national income (Y) of the economy is: (C, I, G, X, M stands for Consumption, Investment, Govt. Expenditure, total exports and total imports respectively.

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