Final answer:
Demand and supply shocks can stem from various sources, including consumer confidence changes, private sector investment fluctuations, natural disasters, and technological advancements, which all influence business cycles differently.
Step-by-step explanation:
Possible sources of demand and supply shocks that can cause business cycles include a variety of economic events not related to government policy. On the demand side, factors like changes in consumer confidence, technological innovations, or fluctuations in investment by private firms in physical capital can cause a shift in the aggregate demand curve.
For instance, during the late 1990s, the U.S. economy experienced a boom in investments by private firms, with investments rising significantly before falling back, illustrating how business cycles can be influenced by shifts in private sector investment. On the supply side, shocks to input goods or labor such as natural disasters or unexpected early freezes can destroy agricultural crops, shifting the aggregate supply curve to the left due to a decrease in product availability at any given price. Governments may respond to these shifts with fiscal policy in an attempt to stabilize the economy.