Imports are goods and services produced in other countries that are bought by residents or businesses within a domestic (home) country. In economic terms, they are considered a leakage from the domestic circular flow of income because money spent on foreign goods does not contribute to the production or income of the domestic economy.

Key features of imports include:

• They decrease aggregate demand (AD) for products made at home. In the standard formula (AD = C + I + G + X − M), imports (M) are subtracted from total spending.
• When a country imports more, domestic spending flows to the foreign sector instead of staying within the local economy.
• The marginal propensity to import (MPM) tracks the portion of each new unit of income that is spent on foreign goods. A higher MPM reduces the strength of the multiplier effect.
• The volume of imports is influenced by domestic income levels, the exchange rate, the price of domestic goods compared to foreign goods, and trade barriers.
• A stronger domestic currency makes foreign goods cheaper, which typically leads to an increase in imports.
• Imports can be final goods, meant for personal consumption, or capital goods, which businesses use to manufacture other products.
• Governments may use import substitution strategies to favor domestic production and increase the effectiveness of local economic policies.