shock

(noun)

Sudden, heavy impact.

Related Terms

Examples of shock in the following topics:

  • Shifts in investment due to shocks

    • A positive demand shock increases the demand (not the quantity demanded), while a negative demand shock decreases the demand.
    • In both cases, the shock impacts the price of the good or service.
    • Demand shocks may originate from tax rates, money supply, and government spending.
    • Demand shocks directly impact investment.
    • Positive demand shocks increase consumer spending.

  • Shifting the Phillips Curve with a Supply Shock

    • Aggregate supply shocks, such as increases in the costs of resources, can cause the Phillips curve to shift.
    • Stagflation caused by a aggregate supply shock.
    • The stagflation of the 1970's was caused by a series of aggregate supply shocks.
    • In this example of a negative supply shock, aggregate supply decreases and shifts to the left.
    • Give examples of aggregate supply shock that shift the Phillips curve

  • Impacts of Policies and Events on Equilibrium

    • One type of event that can shift the equilibrium is a supply shock.
    • A positive supply shock could be an advance in technology (a technology shock) which makes production more efficient, thus increasing output.
    • One extreme case of a supply shock is the 1973 Oil Crisis.
    • This supply shock in turn contributed to stagflation and persistent economic disarray.
    • A supply shock shifts the aggregate supply curve.

  • Recessions

    • Recessions generally occur when there is a widespread drop in spending (an adverse demand shock).
    • This may be triggered by various events, such as a financial crisis, an external trade shock, an adverse supply shock, or the bursting of an economic bubble .

  • The Value of Diversification

    • Systematic risk arises from market structure or dynamics which produce shocks or uncertainty faced by all agents in the market.
    • For example, government policy, international economic forces, or acts of nature can shock the entire market.

  • Reasons for and Consequences of Shift in Aggregate Supply

    • If labor or another input suddenly becomes cheaper, there would be a supply shock such that supply curve may shift outward, causing the equilibrium price in to drop and the equilibrium quantity to increase.
    • A supply shock could be caused by changing regulations or a sudden change in the price of an input, among other reasons.

  • Introduction to Inflation

    • One major reason for cost-push inflation are supply shocks.
    • A supply shock is an event that suddenly changes the price of a commodity or service.

  • Changes in Supply and Shifts in the Supply Curve

    • A shift in supply from S1 to S2 affects the equilibrium point, and could be caused by shocks such as changes in consumer preferences or technological improvements.

  • Using Monetary Policy to Target Inflation

    • Supporters of a nominal income target also criticize the tendency of inflation targeting to ignore output shocks by focusing solely on the price level.

  • The U.S. Trade Deficit

    • But oil price shocks in 1973-1974 and 1979-1980 and the global recession that followed the second oil price shock caused international trade to stagnate.