What is stagflation?

Stagflation is an economic situation where the growth rate slows down, unemployment levels remain steadily high & inflation also stays high.

What is stagflation?

Stagflation, a concept which did not gain acceptance till the 1960s, is described as a situation in the economy where the growth rate slows down, the level of unemployment remains steadily high and yet the inflation or price level remains high at the same time. At the first instance, high inflation and unemployment or slower growth seem like opposites and mutually exclusive.

It came to be seen in the 1970s as a situation when the economy has low productivity and yet the goods are highly priced in spite of low unemployment. The term 'stagflation' came to be used for the first time in the British Parliament by Lain Macleod in 1965. Once stagflation occurs it is difficult to deal with. The measure a government usually takes to revive an economy in recession (cutting interest rates or increasing government spending) also increases inflatio

n.