What's it: An adverse economic shock is a sudden, unexpected, and dramatic change in aggregate supply and demand, hurting the economy. For example, shocks result in high and uncontrollable inflation. Or it causes a recession. In other cases, it
Macroeconomic Equilibrium
Economic Shock: Types, Causes, Impacts
What's it: An economic shock is a sudden and unexpected significant change in an economy's output due to changes in external factors. Shocks suddenly cause the aggregate supply curve or demand curve to shift to the right or left. Such events not
Long-Run Macroeconomic Equilibrium and Its Explanation
What's it: Long-run macroeconomic equilibrium occurs when the aggregate demand curve intersects the short-run aggregate supply curve at the point of the long-run aggregate supply curve. In other words, the short-run macroeconomic
Short-run Macroeconomic Equilibrium and Its Implications for the Economy?
What's it: A short-run macroeconomic equilibrium occurs when the aggregate demand curve and the short-run aggregate supply curve intersect. It determines the actual output (real GDP) and the price level in the economy. Equilibrium may be
Supply Shock: Examples, Causes, Effects
What's it: A supply shock is a sudden and unexpected event causing a dramatic change in output. It can be positive or negative. It is positive if it increases output and negative if it decreases output. Shocks here can refer to macroeconomic
Long-Run Aggregate Supply: Its Curve And Influencing Factors
What's it: Long-run aggregate supply (LRAS) refers to the total output produced in the economy when all inputs are variable. Wages and other inputs are flexible and change proportionately in response to changes in the price level. Thus, firms
Invisible Hand: Concept and Criticism
What's it: Invisible hand refers to the forces that move the market toward equilibrium when there is no intervention. These forces are entirely based on interactions among economic actors in the market. Allowing the supply and demand forces to
Macroeconomic Equilibrium: Short Run Vs. Long Run
What's it: A macroeconomic equilibrium occurs when aggregate supply equals aggregate demand. Aggregate supply represents the total output of goods and services. Meanwhile, aggregate demand represents the total goods and services demanded in the
Full Employment: Meaning, Implication for Unemployment
What's it: Full employment means an economy is fully utilizing its productive resources. At this condition, the economy produces at its potential output, and the unemployment rate is at its natural rate. Is full employment means zero