What Is Demand Shock?
Demand shocks are events in the economy that affect demand for products and services. Tax cuts, an increase in the money supply, an increase in government spending, or an increase in export demand are all positive demand shocks. The decline in aggregate demand due to the international financial crisis is a negative demand shock.
Demand shock
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- Chinese name
- Demand shock
- Foreign name
- demand shocks
- Definition
- Events affecting product and labor needs
- influences
- Make
- Demand shocks are events in the economy that affect demand for products and services. Tax cuts, an increase in the money supply, an increase in government spending, or an increase in export demand are all positive demand shocks. The decline in aggregate demand due to the international financial crisis is a negative demand shock.
- Demand shocks usually cause
- Demand shocks are divided into currency shocks and fiscal shocks. Regarding currency shocks, in the short term, effective monetary policy will lead to an increase in output. In the short term, currency is non-neutral. In the long run, nominal wages and prices absorb all the effects of currency shocks. Changes in the money supply have no effect on output, so money is neutral in the long run. Regarding fiscal shocks, in the short term, fiscal policies are effective, and given the price level, aggregate output levels have soared. In the long run, nominal wages and prices absorb all the effects of fiscal shocks, and changes in government purchasing expenditures have no effect on output.