What causes a positive demand shock?

A positive demand shock occurs when there is a sudden increase in demand for goods and services in an economy. This can be caused by various factors, such as a surge in consumer confidence, increased government spending, tax cuts, or a rise in exports. Additionally, external events like natural disasters or geopolitical tensions can disrupt supply chains, further amplifying demand for existing goods. Overall, a positive demand shock typically leads to higher prices and increased production levels in the short term.