CONTRACTION: A phase of the business cycle characterized by a general period of declining economic activity. A contraction is one of two basic business cycle phases. The other is expansion. The transition from contraction to expansion is termed a trough and the transition from expansion to contraction is termed a peak. The popular term for contraction, one that frequent shows up in the media, is recession. Should you check out the entry recession, you will see information that is essentially identical to that presented here, because they are two terms for the same phenomenon. See also | business cycle | recession | expansion | peak | trough | recovery | real gross domestic product | unemployment rate | unemployment | full employment | inflation | aggregate expenditures | National Income and Product Accounts | Great Depression |
