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Definition of a Supply Shock A supply shock is an unforeseen event that disrupts the normal flow of goods and services, leading to a sudden change in the amount supplied within an economy. This can result in higher or lower prices depending on whether the shock reduces (negative) or increases
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What Is an Output Gap? The term “output gap” refers to the disparity between the actual output of an economy and its maximum potential output, expressed as a percentage of Gross Domestic Product (GDP). An economy’s output gap can be positive or negative. A negative output gap implies that the
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