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. Demand Shock

    A sudden surprise event that temporarily increases or decreases ...
  4. Shock Therapy

    A sudden and dramatic change in national economic policy that ...
  5. Reverse Culture Shock

    The shock suffered by some people when they return home after ...
  6. Shock Absorber

    A temporary restriction placed on the trading of index futures ...
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. Markets

    The Importance of Commodity Pricing in Understanding Inflation

    Commodity prices are believed to be a leading indicator of inflation, but does it always hold?
  3. Markets

    Do Deflationary Shocks Help Or Hurt The Economy?

    Find out how deflationary shocks can both benefit and hurt consumers and businesses.
  4. Markets

    How a Weaker Pound Could Absorb Market Shocks

    Markets remain nervous after Brexit, which sent the British pound plummeting. Yet, we point out some of the long-term benefits for the UK from a weakening currency that many investors are forgetting.
  5. Markets

    Introduction To Supply And Demand

    Find out all about supply and demand and how it relates to your daily purchases.
  6. Markets

    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. Markets

    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
  8. Investing

    Banks Survive Economic Shock in Fed Stress Test

    America's most systemically important banks proved able to withstand a severe economic shock according to the Fed's annual stress test.
  9. Markets

    Macroeconomics: Supply, Demand and Elasticity

    By Stephen Simpson DemandDemand is driven by utility – the pleasure or satisfaction that a consumer obtains from consuming a good or service. Total utility is a function of the quantities ...
  10. Markets

    Crude Oil Peaks and Troughs Over the Past Century

    An overview of the events surrounding major price tops and bottoms in crude oil over the past 100 years.
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 >>
  6. 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 >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center