Young YOU| The meaning of a shrinking economy

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When an economy isn’t doing well, the value of goods and services or GDP shrinks and the economy stops growing, or declines. (Photo: Getty Images/Gallo Images)
When an economy isn’t doing well, the value of goods and services or GDP shrinks and the economy stops growing, or declines. (Photo: Getty Images/Gallo Images)

When the news comes on, either on radio or TV, the state of the economy in South Africa is a subject that often comes up. The economy is the system whereby money is made and spent in a country through the buying and selling of goods and services.

A sign that the economy is healthy and growing is when people have enough money to live and pay for the things they need. When the economy is strong, it means there are jobs available and companies are making money, which allows employees to be paid more. People become better off as the value of the goods and services that the country produces, known as its gross domestic product (GDP), increases.

The size of the GDP helps the government to decide how much money it should spend on public services such as hospitals, schools and safety and whether or not to increase taxes.

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