The causes of changes in the various phases of the economic cycle, including both global and domestic demand-side and supply-side shocks
Sudden events called shocks push economies into different phases of the economic cycle. These shocks can come from inside a country or from abroad, and they can hit either spending (demand) or production capacity (supply).
Real World
The 1973 OPEC oil embargo was a global negative supply-side shock: it cut productive capacity worldwide, triggering simultaneous recession and inflation (stagflation) across Western economies.
Exam Focus
Always classify a shock as demand- or supply-side AND positive or negative — examiners expect both dimensions for evaluation marks.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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