Absorption in Economics  

 

Absorption is not a common term but refers to the total level of spending in an economy. It includes import spending but excludes exports.

Absorption includes spending on all goods and services. Countries with a high marginal propensity to consume tend to have a high absorption rate. For example, the UK and US have had a high level of absorption.

If absorption is greater than production then there will be a deterioration in the current account balance of payments.

 

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