In international trade, exports refer to good and services produced in the domestic country and sold in a foreign country. It is represented by X.

In international trade, imports refer to goods and services bought by the residents of a country from a foreign country. It is represented by M.

X-M represents the net exports of an economy.

For a given value of exports (X), as the income of the domestic residents increases, they are expected to spend more on imports (M) and thus, net exports (X-M) falls. This decrease in net exports may lead to reduced domestic production and decreased use of domestic resources.