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SHOCKS IN THE ECONOMY.pptx

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SHOCKS IN THE ECONOMY.pptx

  1. 1. NAME NAJEEB ULLAH REGISTERATION NO. 3593-SE/BSECO/S20 ASSIGNMENT MACROECONOMICS TEACHER. MR. DOCTOR BABER HUSSAIN
  2. 2. SHOCKS IN THE ECONOMY Shocks may occure to aggregate supply as well as aggregate demand . Supply shocks.  there are two types of shocks . 1) Positive shocks to aggregate supply. 2) Negative shocks to aggregate supply.
  3. 3. EXAMPLES OF POSITIVE SUPPLY SHOCKS . (FAVOURABLE)  Shocks that increases output, which causes prices to decrease due to a shift in the supply curve to the right in the short run .  while in the long run output and inflation remain unchanged.  Shocks may be permanent or temporary. positive supply shocks are 1. Decreases in oil prices. 2. Lower union pressures. 3. A great crop season. 4. Changes in health care industry. 5. Revolution in technology. ETC…..
  4. 4. EXAMPLES OF NEGATIVE SUPPLY SHOCKS. (UNFAVOURABLE)  A negative supply shock decreases output, causing prices to increase.  Any natural disaster or other unanticipated event that disrupts the production process and/or supply-chain.  The Russia-Ukraine war fueling the 'biggest supply shock to global grain markets' in living memory.  A drastic decrease in the available supply of oil due to geopolitical tensions.  China imposing rare earth elements export limits against Japan.
  5. 5.  Negative supply shocks would be any natural disaster or other unanticipated event that disrupts the production process and/or supply-chain.  Increase in food prices due to crops around the world.  When wages hikes immediately.  The COVID-19 pandemic can be seen as a supply shock .
  6. 6. DEMAND SHOCK there are two types of demand shocks . 1)Positive demand shocks. 2)Negative demand shocks.
  7. 7. POSITIVE DEMAND SHOCK.(FAVOURABLE)  A positive demand shock is a sudden increase in demand.  Change in Price Cannot Cause a Demand Shock.  A change in quantity demanded due to a change in price, does not reflect a demand shock.
  8. 8.  There can be many factors that can lead to a positive demand shock.  Some of them include: 1) Government tax cuts. 2) Government stimulus plans. 3) Central bank rate cuts. 4) The introduction of a new technology. 5) The discovery of a previously unknown benefit of a medicine.  ETC…….
  9. 9. NEGATIVE DEMAND SHOCKS. (UNFAVOURABLE)  A positive demand shock is a sudden decrease in demand.  At any price, the quantity demanded decreased, the entire demand curve shifts left.
  10. 10.  There can be many factors that can lead to a negative demand shock. Some of them include: •Government tax increases. •Central bank rate increases. •The cancellation of a government infrastructure project. •The discovery of a harmful compound in a specific cleaning sanitizer. •The discovery of a previously unknown side effect of a medicine. •ETC……

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