# Aggregate Supply Shocks
Aggregate supply shocks are a type of macroeconomic shock that can cause fluctuations in the price and availability of goods and services. They occur when an unexpected event or policy change disrupts production, leading to either an increase or decrease in total available output. These shocks have significant implications for businesses, governments, and markets around the world as they can lead to rapid inflation or deflation depending on which direction the aggregate supply moves after a shock occurs. In order to understand how such events impact cryptocurrency prices it is important to first understand what constitutes a “shock” and why these changes take place.
## What is an Aggregate Supply Shock?
An aggregate supply shock occurs when there is an unanticipated shift in overall economic activity due to sudden changes in market conditions or government policies (e.g., tariffs). This leads to a disruption of production levels resulting from higher input costs, reduced labor productivity, etc.. Consequently, this affects firms’ ability/willingness to produce at current output levels – resulting in either increased demand for existing products causing shortages (inflation) or decreased demand causing oversupply (deflation). The size and scope of the effect will depend largely upon how large-scale these shifts were prior to their occurrence; whether they came as surprise developments; if complementary factors also impacted industrial activity simultaneously; etc..
## How Does It Impact Cryptocurrency Prices?
Since cryptocurrencies are traded 24 hours per day on global exchanges with no central authority setting prices like traditional fiat currency systems do – any perceived threat posed by external forces such as those created through aggregate supply shocks tend be quickly reflected into their respective trading values almost immediately following its release into public domain via media outlets & other forms social discourse platforms online . As such investors must pay close attention not only fundamental trends within industry but also news cycles related macrolevel drivers impacting larger economy since even small movements could result drastic swings pricing volatility given high liquidity nature digital asset class itself . That said , proactive risk management still remains best way protect against potential losses caused sudden extreme drops value .
