<blockquote>
<p>Is export/imports a part of factor income i.e returns from the act of production?</p>
</blockquote>
<p>Yes, they are.</p>
<p>Or better, exports are part of national income, while imports must be subtracted.</p>
<p>If we consider an <em>open economy</em>, that is an economy that includes the foreign sector, exports and imports are recorded in the so-called <em>current accounts of the balance of payments.</em></p>
<p><em>Current accounts</em> record the receipts of sales of currently produced goods and services to foreign sector, that appear as <em>exports</em>, in the national income accounts. The current accounts also record payments for  the import of goods and services from abroad: these appears as <em>imports.</em></p>
<p>The <em><strong>net exports</strong></em> term <span class="math-container">$X-M$</span> (<span class="math-container">$X$</span> are exports and <span class="math-container">$M$</span> imports) enters the (<em>ex post</em>) <strong><em>income accounting identity</em>:</strong></p>
<p><span class="math-container">$$Y= C+I+G+(X-M),$$</span></p>
<p>where <span class="math-container">$Y$</span> is national income, <span class="math-container">$C$</span> is consumption, <span class="math-container">$I$</span> is investment and <span class="math-container">$G$</span> is government expenditure in goods and services.</p>
<p>The reason why <span class="math-container">$X$</span> enters the identity with the sign 'plus' is that exports are a component of  <em>aggregate expenditure</em> (that is the  expenditure  on final goods and services produced by national producers) coming from foreigners, while a part of  aggregate expenditure by domestic residents <span class="math-container">$M$</span> falls on foreign goods and services.</p>
<p>Therefore,  one has to subtract from the total expenditure by domestic residents on final goods and services that portion which is spent on imported goods and services <span class="math-container">$M$</span> and add to the result foreign expenditure on domestically produced goods and services <span class="math-container">$X$</span>.</p>

CC BY-SA 4.0
2023-11-20T15:45:10.990Z
2023-11-20T15:45:10.990Z
BakerStreet
<p>Is export/imports a part of factor income i.e returns from the act of production? If not, then here is my counter argument.</p>
<p>Export is the equivalent value which is added to the goods when it is undergoing production, and it is this value which is distributed to all the factor services.
Could y’all please clear this anomaly.</p>
<p>Thanks</p>

<production-function>
The consideration of export in calculating national income
TheCuriousOne
# The consideration of export in calculating national income

(Asked by: username_0 on 2023-11-20)

Is export/imports a part of factor income i.e returns from the act of production? If not, then here is my counter argument.

Export is the equivalent value which is added to the goods when it is undergoing production, and it is this value which is distributed to all the factor services.
Could y’all please clear this anomaly.

Thanks

**Tags:** production-function

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## 1 answers

### Answer by username_1 on 2023-11-20. Score: 0 | Accepted answer

> Is export/imports a part of factor income i.e returns from the act of production?

Yes, they are.

Or better, exports are part of national income, while imports must be subtracted.

If we consider an *open economy*, that is an economy that includes the foreign sector, exports and imports are recorded in the so-called *current accounts of the balance of payments.*

*Current accounts* record the receipts of sales of currently produced goods and services to foreign sector, that appear as *exports*, in the national income accounts. The current accounts also record payments for the import of goods and services from abroad: these appears as *imports.*

The ***net exports*** term $X-M$ ($X$ are exports and $M$ imports) enters the (*ex post*) ***income accounting identity*:**

$$Y= C+I+G+(X-M),$$

where $Y$ is national income, $C$ is consumption, $I$ is investment and $G$ is government expenditure in goods and services.

The reason why $X$ enters the identity with the sign 'plus' is that exports are a component of *aggregate expenditure* (that is the expenditure on final goods and services produced by national producers) coming from foreigners, while a part of aggregate expenditure by domestic residents $M$ falls on foreign goods and services.

Therefore, one has to subtract from the total expenditure by domestic residents on final goods and services that portion which is spent on imported goods and services $M$ and add to the result foreign expenditure on domestically produced goods and services $X$.


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