<p>Seems like what you are adding up is not the Gross Domestic <strong>Product</strong>, rather something like the Gross Domestic Expenditure.
<span class="math-container">$$
C+I+G+X-M = Y = C+I+G+M-X
$$</span>
could only possibly hold if <span class="math-container">$M - X = 0$</span>, that is if the trade balance was zero. If this is not true, e.g., if <span class="math-container">$M - X &gt; 0$</span> than a country's gross expenditure is larger than its production, so counting these things will not both sum up to <span class="math-container">$Y$</span>.</p>

CC BY-SA 4.0
2020-04-05T17:08:10.703Z
2020-04-05T17:08:10.703Z
Giskard
<p>This might be a basic question, which I don't yet understand. The aggregate expenditure (i.e., in my understanding, the total amount of inflation factored (i.e. real) money spent in the economy by its participants) can be expressed as: <span class="math-container">$$Y = C+I+G+X-M$$</span></p>

<p>where <span class="math-container">$X$</span> is exports and <span class="math-container">$M$</span> is imports. Why isn't it <span class="math-container">$Y = C+I+G+M-X$</span>? Aren't we spending in imports while having a cash flow by exports, i.e. effectivly reducing our expenditures at the end of the day?</p>

<p>We can go through the <a href="https://economics.stackexchange.com/questions/9560/why-are-imports-subtracted-from-gdp?noredirect=1&amp;lq=1">logic that GDP</a> plus the imports (total goods) go to consumption, investment, government spending and exports. Then use GDP=expenditure and arrive to the answer. I don't want to go by that route but instead to focus on real money spent. We spend on imports and receive money on exports, i.e. opposite of the formula above. </p>

CC BY-SA 4.0
2020-04-05T14:45:18.087Z
This question was asked already.  Please see : https://economics.stackexchange.com/questions/9560/why-are-imports-subtracted-from-gdp/9563
Mike J
CC BY-SA 4.0
2020-04-05T15:33:44.067Z
@MikeJ  that post would answer my question if look at from the side of GDP, i.e. goods produced in the economy. But I want to look it from the side of expenditure, i.e. real money spent in the economy by its members. I don't want to use GDP=expenditure logic to arrive to the right conclusion.
Al Guy
CC BY-SA 4.0
2020-04-05T15:34:10.363Z
@Giskard thanks! see my above comment.
Al Guy
<macroeconomics><monetary-policy><balance-of-trade><aggregate-production>
Net exports term in aggregate expenditure
Al Guy
# Net exports term in aggregate expenditure

(Asked by: username_0 on 2020-04-05)

This might be a basic question, which I don't yet understand. The aggregate expenditure (i.e., in my understanding, the total amount of inflation factored (i.e. real) money spent in the economy by its participants) can be expressed as: $$Y = C+I+G+X-M$$

where $X$ is exports and $M$ is imports. Why isn't it $Y = C+I+G+M-X$? Aren't we spending in imports while having a cash flow by exports, i.e. effectivly reducing our expenditures at the end of the day?

We can go through the [logic that GDP](https://economics.stackexchange.com/questions/9560/why-are-imports-subtracted-from-gdp?noredirect=1&lq=1) plus the imports (total goods) go to consumption, investment, government spending and exports. Then use GDP=expenditure and arrive to the answer. I don't want to go by that route but instead to focus on real money spent. We spend on imports and receive money on exports, i.e. opposite of the formula above.

**Tags:** macroeconomics, monetary-policy, balance-of-trade, aggregate-production

> **Comments:**
> **username_1**: This question was asked already.  Please see : https://economics.stackexchange.com/questions/9560/why-are-imports-subtracted-from-gdp/9563  
> **username_0**: @username_1  that post would answer my question if look at from the side of GDP, i.e. goods produced in the economy. But I want to look it from the side of expenditure, i.e. real money spent in the economy by its members. I don't want to use GDP=expenditure logic to arrive to the right conclusion.  
> **username_0**: @username_2 thanks! see my above comment.  

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## 1 answers

### Answer by username_2 on 2020-04-05. Score: 0

Seems like what you are adding up is not the Gross Domestic **Product**, rather something like the Gross Domestic Expenditure.
$$
C+I+G+X-M = Y = C+I+G+M-X
$$
could only possibly hold if $M - X = 0$, that is if the trade balance was zero. If this is not true, e.g., if $M - X > 0$ than a country's gross expenditure is larger than its production, so counting these things will not both sum up to $Y$.


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