Can imports increase more than the increase in the sum of personal consumption expenditures, business investment, and government spending (i.e. gross domestic purchases)?

Yes, imports can increase more than the overall increase in gross domestic purchases. Consider the following examples that illustrate how this can happen. In the first case, imports increase by the same amount as gross domestic purchases. In the second case, imports increase by more than gross domestic purchases.

Case 1. Imports increase by $500, and that amount flows entirely into inventories. Because the increase in imports, which are a subtraction in the calculation of GDP, is equally offset by an increase in inventories, there’s no impact on topline GDP. In that same period, there is a withdrawal from inventories of $350 of goods that were previously produced and added to inventories in a prior period. On net, inventory investment is up $150. In this example, the $350 inventory withdrawal, is equally offset by increases in personal consumption and private fixed investment. In this case, there’s also no impact on GDP because these goods were produced in a prior period. Thus, the increase in imports ($500) is exactly equal to the increase in gross domestic purchases ($150 in inventory investment and $350 in personal consumption and private fixed investment).

Case 2. Building upon the above scenario, let’s factor in a decrease in government spending on research and development in the same period. This results in a $150 decrease in GDP. We now observe that the increase in imports ($500) is fully offset but exceeds the increase in gross domestic purchases ($350). One could substitute other examples where a decrease in expenditures on domestically produced goods and services would partly offset increases driven by imports.