BU204_03_Johnson_Jennifer_Unit 6 Homework

Demand shocks both positive and negative an event

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Demand Shocks, both positive and negative “An event that shifts the aggregate demand curve, such as a change in expectations or wealth, the effect of the size of the existing stock of physical capital, or the use of fiscal or monetary policy”(Krugman & Wells, 2009, p. 335). After reading the material the Demand Shocks, both positive and negative is a sudden surprise event that temporarily increases or decreases demand for goods or services. A positive demand shock increases demand, while a negative demand shock decreases demand. Both positive and negative demand shock have an effect on the prices of goods and services. Example of this would be any natural disaster or other unanticipated event that disrupts the
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production process or supply-chain. An instance of this would be Hurricane Katrina's detrimental effect upon the oil and gasoline industry: oil rigs, refinement plants, and pipelines were either shut down or taken off line.
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Reference Krugman, P. and Wells, R. (2009) Macroeconomics, Second Edition . New York, Worth Publishers
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