Definition of Economic shock:
An economic shock refers to any change to fundamental macroeconomic variables or relationships that has a substantial effect on macroeconomic outcomes and measures of economic performance, such as unemployment, consumption, and inflation. Shocks are often unpredictable and are usually the result of events thought to be beyond the scope of normal economic transactions. Economic shocks have widespread and lasting effects on the economy, and are the root cause of recessions and economic cycles in Real Business Cycle Theory.
Economic shocks can be classified as primarily impacting the economy through either the supply or demand side. They can also be classified by their origin within or impact upon a specific sector of the economy. Because markets and industries are interconnected in the economy, large shocks to either supply or demand in any sector of the economy can have far-reaching macroeconomic impact. Economic shocks can be positive (helpful) or negative (harmful) to the economy, though for the most part economists, and normal people, are more concerned about negative shocks. .
Unexpected, unpredictable events which result in drastic economic changes. Changes can be either positive or negative, and are often caused by natural disasters.
How to use Economic shock in a sentence?
- Economic shocks are random, unpredictable events that have a widespread impact on the economy that are caused by things outside the scope of economic models. .
- Because markets are connected, the effects of shocks can move through the economy to many markets and have a major macroeconomic impact, for better or worse. .
- Economic shocks can be classified by the economic sector that they originate from or by whether they primarily influence either supply or demand.
Meaning of Economic shock & Economic shock Definition