The US economy will face economic contraction if a series of events results in decrease of investment in the economy.
When domestic output, such as GDP, falls, there is an economic contraction. It has a negative impact on other areas such as individual income, production, and sales. The unemployment rate may rise. A loss of confidence slows demand, causing an economic contraction. It is triggered by an event, such as a stock market correction or crash. The true cause, however, precedes the widely publicized event. It could be caused, for example, by an increase in interest rates, which reduces capital spending.
Investors sell stocks, driving down prices and reducing funding for large corporations leading to stock market crash. Businesses reduce spending and then lay off employees. This reduces consumer spending, resulting in additional business losses and layoffs.
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