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Investments glossary

Supply Shock

A supply shock is an unexpected event that suddenly changes the supply of a product or commodity, resulting in an unforeseen change in price. Supply shocks can be negative, resulting in a decreased supply, or positive, yielding an increased supply; however, they’re often negative. Assuming aggregate demand is unchanged, a negative (or adverse) supply shock causes a product’s price to spike upward, while a positive supply shock decreases the price.

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