|MadSci Network: Astronomy|
This is an excellent question. I believe a totally satisfactory answer would require a pretty intense study of General Relativity, plus lots of tensor equations. The short form: Matter does not only exist in spacetime, it creates spacetime. The density of matter (both magnitude and distribution) sets up the boundary conditions for the Einstein equations. [The Einstein equations are the equations that describe how matter distorts spacetime and how matter responds to distorted spacetime.] In effect, the density defines the metric, the "rulers" that measure spacetime.
Under proper conditions, it's possible to find a metric whose time-dependence implies a shrinking Universe. [Indeed, the conditions are quite simple. A uniform distribution of matter must either result in an expanding or contracting Universe, which means that spacetime would be shrinking.]
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