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the circular flow since they provide a demand for goods produced abroad.
Demand for exports is determined by conditions in foreign economies and some economists do not believe that exports depends on domestic income. However, there exists a relationship between exports and domestic aggregate demand.
Imports from other countries may be raw materials for domestic production or goods for direct consumption by households, such as a Japanese television set or a bottle of French wine. We expect demand for imports to rise when domestic income and output rise.

In an open economy, that is an economy having contacts with other countries, we consider imports to be a leakage from the circular flow since they provide a demand for goods produced abroad.
Demand for exports is determined by conditions in foreign economies and some economists do not believe that exports depends on domestic income. However, there exists a relationship between exports and domestic aggregate demand.
Imports from other countries may be raw materials for domestic production or goods for direct consumption by households, such as a Japanese television set or a bottle of French wine. We expect demand for imports to rise when domestic income and output rise.