Here are the essential concepts you must grasp in order to answer the question correctly.
Faraday's Law of Electromagnetic Induction
Faraday's Law states that a change in magnetic flux through a loop induces an electromotive force (EMF) in the loop. The induced EMF is proportional to the rate of change of the magnetic flux. In this scenario, as the circumference of the loop decreases, the magnetic flux through the loop changes, leading to the generation of an induced current.
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Lenz's Law
Lenz's Law states that the direction of the induced current will be such that it opposes the change in magnetic flux that produced it. This means that if the loop is shrinking and the magnetic flux is decreasing, the induced current will flow in a direction that attempts to maintain the original magnetic flux through the loop.
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Magnetic Field Orientation
The orientation of the magnetic field is crucial in determining the direction of the induced current. In this case, the magnetic field is perpendicular to the plane of the loop. By applying the right-hand rule, one can determine the direction of the induced current based on the orientation of the magnetic field and the change in area of the loop.
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Magnetic Fields and Magnetic Dipoles