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A technology shock is the kind resulting from a technological development that affects productivity. If the shock is due to constrained supply, it is termed a supply shock and usually results in price increases for a particular product. Supply shocks can be produced when accidents or disasters occur.
In the short run, an economy-wide negative supply shock will shift the aggregate supply curve leftward, decreasing the output and increasing the price level. [1] For example, the imposition of an embargo on trade in oil would cause an adverse supply shock, since oil is a key factor of production for a wide variety of goods.
Economists offer two principal explanations for why stagflation occurs. First, stagflation can result when the economy faces a supply shock, such as a rapid increase in the price of oil. An unfavourable situation like that tends to raise prices at the same time as it slows economic growth by making production more costly and less profitable.
“The prospect of a prolonged strike combined with a federal shutdown is the greatest threat to the American economy, future job growth, and our state's fiscal health if a deal is not made soon ...
A string of such productivity shocks will likely result in a boom. Similarly, recessions follow a string of bad shocks to the economy. Without shocks, the economy would continue following the growth trend with no business cycles. To quantitatively match the stylized facts in Table 1, Kydland and Prescott introduced calibration techniques. Using ...
Central banks reducing emergency stimulus too quickly and further supply chain disruption are among the top risks to the world economy next year as the COVID-19 pandemic lingers, according to ...
During the 2007–2008 financial crisis and the Great Recession, a negative demand shock in the United States economy was caused by several factors that included falling house prices, the subprime mortgage crisis, and lost household wealth, which led to a drop in consumer spending.
As would later also occur in the post-Soviet states, shock therapy resulted in redistribution from the bottom-up, benefiting those who held non-monetary assets. [2]: 5 Although Erhard's price liberalization excluded rents and essential goods, it still caused an increase in inflation and resulted in a general strike.