What term refers to the situation when businesses are affected by external factors, often experiencing lower sales and profits?

The term that describes the situation when businesses experience lower sales and profits due to external factors is "Recession." A recession is characterized by a significant decline in economic activity across the economy, lasting more than a few months. It typically involves a drop in GDP, rising unemployment, and decreased consumer spending, which directly impact businesses. During a recession, consumers may curb their spending due to uncertainty about their financial future, leading to a decline in sales for many companies.

While "Contraction" is a broader term that refers to a decline in economic activity and may include various factors affecting businesses, it's important to note that "Recession" specifically addresses a prolonged period of widespread economic decline. The other terms like "Expansion" and "Recovery" indicate growth and improvement in economic conditions, which are opposite concepts to what happens during a recession.