In an open economy, the national income (Y) of the economy is : (C, I, G, X, M stand for Consumption, Investment, Govt. Expenditure, total exports and total imports respectively.)

Option 3 is correct. In an open economy, national income (GDP) equals consumption plus investment plus government spending plus net exports (exports minus imports). Exports are an additional source of demand (an injection) while imports are a leakage that must be subtracted to avoid counting foreign production as domestic output [1]. Standard national-account identities present GDP as Total consumption + Total investment + Exports − Imports, which can be written as Y = C + I + G + (X − M) under the expenditure approach [2]. Aggregate-expenditure treatments similarly express aggregate demand as C + I + G + (X − M), confirming that net exports (X − M) must be added to the closed-economy components to obtain Y in an open economy.

Sources

1. [1] Macroeconomics (NCERT class XII 2025 ed.) > Chapter 6: Open Economy Macroeconomics > National Income Identity for an Open Economy > p. 97
2. [2] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 1: Fundamentals of Macro Economy > 2. Expenditure Method > p. 14