Absorption

By:

James Knight

James is a lead editor for Invezz, where he covers topics from across the financial world, from the stock… read more.

Updated: Aug 20, 2021

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1. In the national accounts, the total of expenditure on real goods and services, by consumers, investors, and the government. Absorption is the use of output: it excludes exports and includes imports. This is contrasted with production, which includes exports and excludes imports. The absorption approach to devaluation looks at its effects on various forms of expenditure and points out that devaluation can only improve the balance of payments on current account if production increases relative to absorption. 2. In industrial organization, a ‘merger in which the acquired company transfers all its assets and liabilities to the acquiring company in exchange for its securities and cash.

Reference: Oxford Press Dictonary of Economics, 5th edt.