Shock (economics)

In economics, a shock is an unexpected or unpredictable event that affects an economy, either positively or negatively.

An inflationary shock happens when prices of commodities increase suddenly (e.g., after a decrease of government subsidies) while not all salaries are adjusted immediately throughout society (this results in a temporary loss of purchasing power for many consumers); or that production costs begin to exceed corporate revenues (e.g. following energy price hikes).

A monetary policy shock occurs when a central bank changes, without sufficient advance warning, its pattern of interest rate or money supply control.

Some evidence shows that negative economic shocks cause individuals to lose faith in political systems, though this erosion of trust is often temporary, rebounding over time.

A narrow portion of voters may change their voting patterns in response to shock, which can include support for candidates and policies that are antiestablishment, populist, leftist, or ceasing to participate in the electoral process.