Aggregate Supply Shock

An Aggregate Supply Shock refers to a sudden, unexpected change in the overall production capacity of an economy. It can be caused by events like natural disasters, energy shortages, or geopolitical tensions, which disrupt the supply of goods and services. When such disruptions occur, they can lead to higher prices (inflation) or reduced output, affecting economic growth and employment. Essentially, it's a sudden change that impacts how much an economy can produce, influencing prices and overall economic stability.