What is the correct national income accounting identity in an open economy?
A) Y = C + I + G
B) Y = C + I + G + X + M
C) Y = C + I + G - X + M
D) Y = C + I + G + X - M

Question

Quizplus · Accepted Answer

The correct national income accounting identity in an open economy is Y = C + I + G + X - M, where Y is the national income, C is consumption, I is investment, G is government spending, X is exports, and M is imports. This formula accounts for trade with the rest of the world by subtracting imports from exports.

What Is the Correct National Income Accounting Identity in an Open