Economic contraction
/ˌɛkəˈnɑːmɪk kənˈtrækʃən/
B2
Definition
Economic contraction is when a country's economy shrinks or slows down. This means fewer goods and services are made and sold, and people and companies often spend less money. It is the opposite of economic growth.
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⚡ See It in Action
A period when the economy shrinks or slows
- •The country experienced economic contraction after the factory closed.
- •Economic contraction often leads to higher unemployment.
- •During economic contraction, people usually buy fewer luxury goods.
A general decrease in economic activity
- •Economic contraction can affect many industries at once.
- •Governments try to avoid economic contraction by using policies to encourage spending.
🧲 Make It Stick
- ✓Think of "economic contraction" like "slow down," but for a whole country's money and business activity.
- ✓Picture a balloon slowly getting smaller as air leaves it—that shrinking balloon is like the economy during contraction.
- ✓It's the feeling when a store has fewer customers and sells less than before.
- ✓Sounds like "economic con-TRACTION" → imagine something being pulled tight or made smaller (contraction means getting smaller).
- ✓Think of winter in business: things slow down, fewer jobs, less buying, like nature resting before spring.
- ✓NOT like "economic growth" (getting bigger and better), economic contraction means the economy is getting smaller or weaker.
- ✓NOT like "recession" exactly (which is a longer or more official economic decline), contraction can be shorter or less severe.
- ✓NOT caused by one person or company, economic contraction happens because many people and businesses reduce spending.
🔄 Try Other Words
- •Recession: a longer, more serious economic decline (Use when contraction lasts a longer time and affects many areas)
- •Decline: general decrease or reduction (Use when talking about smaller or less formal decreases)
- •Downturn: a period when business activity falls (Use in business or economic contexts for mild to moderate decreases)
- •Slowdown: a reduction in speed or activity (Use when the economy is still growing but more slowly)
🔍 Unboxing
- •Word parts: "economic" (related to economy) + "contraction" (from contract, meaning to get smaller)
- •Etymology: "economic" comes from Greek "oikonomikos" meaning managing a household or resources; "contraction" comes from Latin "contrahere" meaning to draw together or shrink
- •Historical development: "economic contraction" became common in economics to describe periods of shrinking economic activity, especially during financial crises or recessions
- •Modern usage: Used in news, reports, and studies to describe times when the economy is not growing or is shrinking
💭 Reflect & Connect
•How do you think economic contraction affects everyday people’s lives and jobs?
•Can economic contraction ever be a good thing? Why or why not?
Fill in the blanks with the correct word:
1.Economic contraction happens when many businesses ___ their production and sales drop.
2.During economic contraction, people usually feel ___ about spending money.
3.Economic contraction is different from economic growth because one means the economy is ___ and the other means it is ___.
4.Governments try to stop economic contraction by encouraging ___ and investment.
5.A short economic contraction might be called a ___, but a longer one is called a recession.
6.Economic contraction often causes ___ rates to rise because companies hire fewer workers.
7.When a country faces economic contraction, many industries ___, not just one.