Import/Export

Export goods or services are provided to foreign consumers by domestic producers. Export of commercial quantities of goods normally requires involvement of the customs authorities in both the country of export and the country of import. The advent of small trades over the internet such as through Amazon and e-Bay has largely bypassed the involvement of Customs in many countries due to the low individual values of these trades. Nonetheless, these small exports are still subject to legal restrictions applied by the country of export. An example would be the export control regulations in the United States.

Absorption, or domestic spending, includes both domestically produced and imported goods and services. When a nation increases its domestic spending, the imports are naturally following the increase, therefore the plus sign. The real exchange rate, σ, is a nations competitiveness towards other nations since it is the relative price of goods produced at home compared to goods produced abroad. When the real exchange rate increases foreign goods become less expensive and imports then increase.