Economic Contraction
Definition
Economic contraction refers to a period when there is a decline in an economy's production capacity, resulting in a decrease in real GDP. It is often associated with a slowdown or recession.
Related terms
Unemployment: Unemployment refers to the number of people who are actively seeking employment but are unable to find jobs. During an economic contraction, unemployment tends to rise.
Recession: A recession is a significant and prolonged economic contraction characterized by declining GDP, increased unemployment, and reduced business activity.
Fiscal Policy: Fiscal policy refers to government actions related to taxation and spending that aim to influence the overall state of the economy. During an economic contraction, governments may implement expansionary fiscal policies to stimulate growth.
"Economic Contraction" appears in:
Subjects (1)
AP Microeconomics
Study guides (1)
AP Macroeconomics - 1.2 Opportunity Cost and the Production Possibilities Curve (PPC)
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About Us
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CCPA Privacy Policy
Resources
Cram Mode
AP Score Calculators
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Glossary
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Crisis Text Line
Help Center
© 2024 Fiveable Inc. All rights reserved.
AP® and SAT® are trademarks registered by the College Board, which is not affiliated with, and does not endorse this website.