I saw this term on the news when discussing the economy and current inflation going on. What does this mean?
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Please ignore the other comment as it is completely incorrect.
First, we need to understand what a shock is. In economic terms a shock refers to a sudden movement that shifts economic relationships. For example the covid crisis caused a supply shock that suddenly decreased supply of goods. If you are familiar with supply/demand curve, this means a shift in the supply curve. Now a financial shock refers to sudden movements in for example asset prices or borrowing cost.
edit for clarity: shock just refers to a strong, sudden and unexpected movement of curves, it can be both “positive” or “negative” there is no judgement inherent in the term.
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