Question

Which one of the following expresses ‘National Income Identity’ for a closed economy?

• A. Y = C + I + G
• B. Y = C + I + G + X
• C. Y = C + I + G + (X - M)
• D. Y = C + I + G + NX

Hint:

In a closed economy, there are no exports or imports, so the national income identity is \(Y = C + I + G\).

Answer 1

The Correct Option is A

Step 1: Definition of National Income Identity for a closed economy.
In a closed economy, there are no exports or imports (X = M), and the national income is the sum of consumption (C), investment (I), and government spending (G).
Step 2: National Income Identity.
In the case of a closed economy, the identity for National Income (Y) is: \[ Y = C + I + G \] where \(C\) represents consumption, \(I\) is investment, and \(G\) is government spending.
Step 3: Conclusion.
Thus, the correct answer is (A) Y = C + I + G. Final Answer: \[ \boxed{\text{Y = C + I + G}} \]