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Imports cause GDP to go down relative to C+I+G. Imports are included in C+I+G, so when imports increase, C+I+G also increases. But the goal of calculating GDP
by WillPostForFood 4y ago
Imports cause GDP to go down relative to C+I+G.
Imports are included in C+I+G, so when imports increase, C+I+G also increases. But the goal of calculating GDP is to exclude imports, so imports are subtracted from the total. Therefore there is no effect on GDP from increased imports.
You were wrong when you said GDP decreased because imports increased, which is how this started. That's not being pedantic, that's correcting a misunderstanding of the how GDP works.
Don't feel bad, this is very commonly misunderstood and misreported, so you have company. People see the "- Imports" at the end of the equation and think they understand imports subtract from GDP. Easy but naive mistake. It's your confidence in your misunderstanding that pushes it into DK territory. Your unwillingness to read or comment on the Fed's own explanation of this is a little shocking though.