Technology shock

Technology shocks are events in a macroeconomic model, that change the production function. The term shock is defined as a sudden change in economic terms. Usually this is modeled with an aggregate production function that has a scaling factor.

A technology shock is when there is a sudden change in technology to either benefit or worsen economic activity. This type of shock has big effects on companies that are solely dependent on technology as their main source of labor or production, such as manufacturing plants or oil/energy extraction.