Supply shock
A disruption to economic activity caused by a sudden interruption to supply of important products, or a sharp rise in price. In the modern era, supply shocks are often associated with energy: the oil embargo imposed by OPEC in the 1970s, for example, or Russia’s restrictions on gas supplies after its invasion of Ukraine in 2022. The covid-19 pandemic, which caused many businesses to close, was another supply shock. Supply shocks usually result in both higher inflation and lower output, and are thus difficult for policymakers to tackle.
