What Is an 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. These shocks can have a lasting impact on the economy and are caused by random and unpredictable events. Understanding economic shocks involves classification based on their impact on supply or demand, the sector of the economy they originate from, and whether they result from changes in real economic activity or the nominal values of financial variables.
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