What impact do imports have on GDP calculations?

Imports subtract from GDP because GDP, or Gross Domestic Product, is calculated as the total value of all goods and services produced within a country's borders over a specific time period. The formula for calculating GDP is often represented as GDP = C + I + G + (X - M), where C stands for consumption, I for investment, G for government spending, X for exports, and M for imports.

In this formula, imports are denoted as "M," and since they are goods and services produced outside the country, they are subtracted from the overall GDP calculation. Including imports without subtracting them would result in overestimating domestic economic activity, as they do not reflect production within the economy. Thus, the accurate representation of a country’s economic output must take imports into account by subtracting their value from the total.

The other choices do not reflect the correct relationship between imports and GDP. Imports do not add to GDP, they do affect it, and they do not stabilize it; they directly decrease the calculated GDP figure by the value of the imports.