Real Shocks

What are real shocks?

A real shock to an economy is an unexpected or unpredictable event that affects the fundamental factors of production. It can have a positive or a negative effect. Examples of real shocks include droughts, changes to the oil supply, hurricanes, wars, and technological changes.

Real shocks are not limited to one sector of an economy; they may be amplified and transmitted to other areas. Big enough real shocks can result in economy-wide recessions – or even a depression.

Want to dive deeper into these topics? Check out our Macroeconomics section on Business Fluctuations where we cover real shocks in more detail.