In an open economy, the GNP is measured as_____________?

Analyze the question: The question asks how national income (GNP/GDP by the expenditure approach) is measured in an open economy, meaning one that trades with other countries.

Explain the concept: The expenditure approach adds up all spending on final goods and services:

• C = Consumption
• I (written as "1" in the question, a typo) = Investment
• G = Government spending
• X = Exports
• M = Imports

In a closed economy there is no foreign trade, so: Y = C + I + G

In an open economy, we add net exports, which is exports minus imports: Y = C + I + G + (X − M)

Imports are subtracted because they are spending on goods produced abroad. Exports are added because foreigners spend on our goods.

Check the options:

• A. C + I + G(X − M): This is clearly meant to be C + I + G + (X − M), but it is written with a typo. Taken literally, it would multiply G by (X − M), which makes no economic sense. It is still the only option that includes net exports.
• B. C + I + G: This is the closed economy formula. ✗
• C. C + I + G + X: This ignores imports. ✗
• D. C + I + G + M: This adds imports instead of subtracting them. ✗

Answer: Option A is the only one that contains the net exports term (X − M), so it is the intended answer. Note that the "+" sign before (X − M) appears to have been lost in the question's printing.

Exam tip: Remember "C + I + G + (X − M)": the open economy simply adds net exports to the closed economy formula. If an option has only X or only M, it is incomplete. In JAMB, a printing typo like this is common, so choose the option with the correct concept.