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absorption


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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.

Subjects: Economics.


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