Economic Shock

What is an 'Economic Shock'

An economic shock is an event that produces a significant change within an economy, despite occurring outside of it. Economic shocks are unpredictable and typically impact supply or demand throughout the markets.

BREAKING DOWN 'Economic Shock'

An economic shock may come in a variety of forms. A shock in the supply of staple commodities, such as oil, can cause prices to skyrocket, making it expensive to use for business purposes. The rapid devaluation of a currency would produce a shock for the import/export industry because a nation would have difficulty bringing in foreign products.

RELATED TERMS
  1. Supply Shock

    An unexpected event that changes the supply of a product or commodity, ...
  2. Statement Shock

    The shock associated with opening an investment statement and ...
  3. Shock Absorber

    A temporary restriction placed on the trading of index futures ...
  4. Market Price

    The current price at which an asset or service can be bought ...
  5. Core Inflation

    A measure of inflation that excludes certain items that face ...
  6. Supply

    A fundamental economic concept that describes the total amount ...
Related Articles
  1. Retirement

    The Bright Side Of The Credit Crisis

    Find out how this tough economic period can be a learning experience for all.
  2. Insurance

    The Causes And Effects Of Credit Shocks

    These shocks cycle through history. Find out what you need to know to avoid the alarm bells.
  3. Taxes

    Best Solutions For An Unexpected Tax Bill

    Finding out you owe when you expected a refund is a nasty shock. Find out how to cope with the bad news.
  4. Economics

    Do Deflationary Shocks Help Or Hurt The Economy?

    Find out how deflationary shocks can both benefit and hurt consumers and businesses.
  5. Economics

    Economics Basics: Supply and Demand

    Investopedia explains: The Law of Demand, The Law of Supply, Supply and Demand Relationship, Equilibrium, Disequilibrium, and Shifts vs. Movement
  6. Economics

    What Is Supply?

    Supply is the amount of goods a producer is willing to produce at a given price, and is one of the most basic concepts in economics.
  7. Investing Basics

    Three Investing Lessons from the Napa Earthquake

    Here are three investing lessons from last week’s earthquake.
  8. Markets

    What Is The Current Market Supply For Oil?

    Oil prices skidded by more than 10 %, sparking a sell-off in U.S. equities of 3.5 %, a Treasury rally and global headlines of growth fears and tumult.
  9. Economics

    An Economic Outlook For 2012

    Here's what economic forecasters are predicting for 2012.
  10. Forex Education

    4 Factors That Shape Market Trends

    Trends allow traders and investors to capture profits. Find out what's behind them.
RELATED FAQS
  1. Why do supply shocks occur and who do they negatively affect the most?

    Take a deeper look at the nature of supply shocks, an economic phenomenon that dramatically changes the equilibrium level ... Read Answer >>
  2. What are common examples of aggregate demand shocks?

    Learn about some common examples of demand shocks in the economy, how they occur and function, and what it means to aggregate ... Read Answer >>
  3. How long does the average demand shock affect pricing?

    Read about the nature of demand shocks in an economy, how they correlate with prices, and what determines the length and ... Read Answer >>
  4. What are some common examples of demand shock?

    Discover some common examples of demand shock. Demand shocks lead to rapid increases or decreases in demand that catch everyone ... Read Answer >>
  5. How does a lack of demand affect financial markets?

    Discover how a lack of demand affects financial markets. A lack of demand leads to a new price equilibrium, as prices dramatically ... Read Answer >>
  6. Is demand or supply more important to the economy?

    Learn more about the impact of supply and demand in an economy. Find out why companies study supply and demand as part of ... Read Answer >>
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center