Final answer:
Absorption-costing income statements include all manufacturing costs in the cost of a product made for external reporting. This method differs from variable costing by including fixed manufacturing overhead. It relates to economic activities where all costs are considered, akin to how income payments are treated in trade and capital markets.
Step-by-step explanation:
The income statement prepared for external parties is referred to as absorption-costing income because all manufacturing costs, both fixed and variable, are 'absorbed' by the units produced. In absorption costing, the cost of a product includes all the production costs: direct materials, direct labor, and both variable and fixed manufacturing overhead. This differs from variable or direct costing, where fixed manufacturing overhead is not included in product costs.
The concept aligns with economic transactions in the overall measure of trade and can be correlated with consumer expenditures on goods and services. Similarly, in a broader economic context, income payments in the current account balance reflect money exchanges that occur in the financial capital market. These can include money received by U.S. investors on foreign investments (money flowing into the United States) and payments to foreign investors (money flowing out of the United States), showcasing both goods/service transactions and capital market activities.