Which of the following can be used to measure the Gross National product in an open economy?
Answer Details
The correct option to measure the Gross National Product (GNP) in an open economy is "C+I+G+(X-M)".
The formula for GNP includes all the goods and services produced by the residents of a country, regardless of their location. In an open economy, this means that goods and services produced abroad by a country's residents need to be subtracted from the formula, and goods and services produced within the country by non-residents need to be added to the formula.
The letters in the formula represent the following:
- C: Consumer spending on goods and services
- I: Investment spending on capital goods
- G: Government spending on goods and services
- X: Exports, which are goods and services produced domestically and sold to foreign countries
- M: Imports, which are goods and services produced in foreign countries and purchased domestically
Therefore, the correct formula to measure GNP in an open economy is "C+I+G+(X-M)", as it includes all the components needed to account for both domestic and foreign production and consumption.