In the context of economics, absorption is a term which refers to the total amount of goods and services which are consumed by a nation. This includes domestic production as well as imports. It includes not only consumption by the consumer but also includes government spending, investments and net exports (that is, exports minus imports). So, this measures the total demand of an economy.
In simple terms, consider absorption as the total amount of commodities which a country uses up or absorbs. This includes everything made inside the country plus what it buys from other countries minus what it sells other countries.
Absorption, is a crucial concept in macroeconomics. It is particularly used in he analysis of the balance of payments of a country and in understanding its impact on fiscal and monetary policy. It helps the economists and the policymakers to measure the overall level of demand within an economy and make decisions about resource allocation, trade policies and economic growth strategies.
When a country is has a trade deficit, it would means that the absorption of such country is greater than its production. It means that it is buying more goods and services from abroad than it is selling. Similarly, a government when it increases its spending on infrastructure projects would increase the absorption of a country. This is so because, it adds to the total demans within the economy.
Source: A to Z of Economics by Dr. NC Raghavi Chakravarthy