Using Expenditure Approach to estimate National Income, Y is equal to

Analyzing the question: You are asked for the formula for national income using the expenditure approach.

Concept: The expenditure approach adds up all spending on final goods and services in the economy:

• C = Consumption expenditure (households)
• I = Investment expenditure (firms)
• G = Government expenditure
• X – M = Net exports (exports minus imports)

This gives GDP at market price: Y = C + I + G + (X – M)

Working through the options:

• A. C + I + G + X – M + P – V: It has the right core terms, but "+ P – V" has no standard meaning here.
• B. C + I + G + X – M + P: It has the right core terms. The extra "P" is probably the question bank's notation for something like property or net factor income from abroad. That would move the figure from GDP towards GNP, so this is the closest match to the standard formula.
• C. C + I + G – X + P: Exports are subtracted and imports are missing, so it is wrong.
• D. C – I + G + X – M + P: Investment is subtracted, so it is wrong.
• E. C + I – G + X – M – P: Government spending is subtracted, so it is wrong.

Note on the "P" term: The textbook formula is just Y = C + I + G + (X – M). Option B has the right structure with an added term, and the other options contain clear errors, such as subtracting I, G, or X. So B is the best choice.

Answer: B

Exam tip: Remember "C I G X-M", as in "see, I gee, ex-em". Then check each option for sign errors. Only the investment, government, and export terms can be positive. Imports are always subtracted.