Economic contraction refers to a decline in a country's economic activity, typically measured by a decrease in its Gross Domestic Product (GDP). This situation can occur due to various factors, such as reduced consumer spending, lower business investment, or external shocks like a financial crisis. During an economic contraction, businesses may face lower sales, leading to layoffs and higher unemployment rates. As economic activity slows, governments and central banks often implement measures to stimulate growth, such as lowering interest rates or increasing public spending. Prolonged economic contraction can lead to a recession, which is defined as two consecutive quarters of negative GDP growth, impacting the overall well-being of the population.