Economics Part A

The effect of Imports

Imports are an addition to local sources. When a country imports, it enlarges its resources.

If a country’s GDP is 1,000 loaves of bread, and it imports another 500 loaves of bread, its total available resources are 1,500 loaves of bread.

If a country exports none of its bread, and uses all of it for local consumption, then its equation looks like this:

Y + IM = C + I

(Import = IM)

If a country both exports and imports goods, then its equation is:

Y + IM = C + I + EX

Some economists combine imports and exports on one side of the equation by moving imports to the right side. The equation is then:

Y = [C + I + EX] - IM

This form of the equation emphasizes that GDP is equal to all goods and services used, minus the imports in other words, everything produced in a country.

The effect of Imports522The effect of Imports