# Net exports term in aggregate expenditure [duplicate]

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 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.

• This question was asked already. Please see : economics.stackexchange.com/questions/9560/… – Mike J Apr 5 at 14:45
• @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 Apr 5 at 15:33
• @Giskard thanks! see my above comment. – Al Guy Apr 5 at 15:34

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 $$Y$$.