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.

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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. What are the most common signs of impending hyperinflation?

    Learn why supply shocks in commodities such as oil and a rapidly expanding money supply are two potential signs of impending ... Read Answer >>
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