Stagflation

➖ A term that defines a situation characterized by a simultaneous increase in prices (inflation) and stagnation of economic growth.

➖ Stagflation can also be defined as a period of inflation combined with a decline in the gross domestic product (GDP).

— The situation may comprise of following elements-

1) growth rate of the economy slows down

2) the level of unemployment remains steadily high

3) yet the inflation or price level remains high at the same time.

➖ Said to happen when an economy faces stagnant growth as well as persistently high inflation.

➖ In other words, the worst of both worlds.

➖ That is because with stalled economic growth, unemployment tends to rise and existing incomes do not rise fast enough and yet, people have to contend with rising inflation.