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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.
For example, advocates of Real Business Cycle Theory [citation needed] argue that real shocks cause recessions and that the market responds efficiently to these real economic shocks. Krugman dismisses Say's law as, "at best, a useless tautology when individuals have the option of accumulating money rather than purchasing real goods and services ...
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 ...
The Panic of 1930 was a financial crisis that occurred in the United States which led to a severe decline in the money supply during a period of declining economic activity. A series of bank failures from agricultural areas during this time period sparked panic among depositors which led to widespread bank runs across the country.
“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 ...
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.