Economic Contraction

An economic contraction occurs when a country's economy slows down over a period of time, typically measured by a decrease in gross domestic product (GDP). It indicates less economic activity, such as reduced consumer spending, lower business investment, and decreased employment. This slowdown can result from various factors like reduced demand, higher interest rates, or external shocks. During a contraction, businesses may cut back production, layoffs can increase, and overall income levels may decline. While contractions are part of the economic cycle, prolonged periods can lead to recessions, affecting individuals and businesses nationwide.