Current Affairs, 16-07-2020, What is Stagflation?
What is Stagflation?
Stagflation is a seemingly contradictory condition described by slow economic growth and relatively high unemployment, or economic stagnation, which is at the same time accompanied by rising prices (i.e. inflation). Stagflation can also be alternatively defined as a period of inflation combined with a decline in gross domestic product (GDP).
Stagflation refers to an economy that is experiencing a simultaneous increase in inflation and stagnation of economic output.
Stagflation was first recognized during the 1970's, where many developed economies experienced rapid inflation and high unemployment as a result of an oil shock.
Prevailing economic theory at the time could not easily explain how stagflation could occur.
Since the 1970's, rising price levels during periods of slow or negative economic growth have become somewhat of the norm rather than an exceptional situation.