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Demand shock

Demand shocks occur when the demand for products drops as people stop earning money. A tactic to fix this is to stimulate the economy. In 2008, Australia gave households cash and encouraged them to spend to jumpstart the economy.

In 2020, the problem is also a lack of goods because businesses stopped working. If you give people more money, businesses will increase their prices, which will lead to a rise in inflation.

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Supply shocks occur when people still have money to spend but cannot do so because shops are closed, or prices have shot up.

The 2020 crisis is a mix of supply and demand shocks, brought on by furloughing and temporarily preventing work in specific sectors. This makes it h...

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