The Econ 101 formula for GDP (GDP = Consumption + Investment + Government purchases + Exports – Imports) hides the fact that imports are added to the first three categories before being subtracted, having a net effect of zero. This leads news outlets, including an example from the NY Times, to erroneously report that imports drag down GDP.
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The Econ 101 formula for GDP (GDP = Consumption + Investment + Government purchases + Exports – Imports) hides the fact that imports are added to the first three categories before being subtracted, having a net effect of zero. This leads news outlets, including an example from the NY Times, to erroneously report that imports drag down GDP.
Imports can affect GDP positively or negatively, but only indirectly, and [tariffs on imported intermediate goods have been shown to be a net negative](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4215028).Â