The foreign sector also plays a role in a country’s circular flow of expenditures
because some currently produced goods and services are purchased by residents
of other countries, exports (X), while a given country’s residents use some of
their income to purchase goods and services produced in other countries, imports
(M). Net export spending (F), or export spending (X) minus import spending (M),
measures
the net effect of the foreign sector on the domestic economy. Import
spending is subtracted from export spending because it represents a flow of expenditures
out of the domestic economy to the rest of the world