What is Stagflation?

Stagflation is an economic condition when stagnant economic growth, high unemployment, and high inflation combine together. Basically, inflation plus stagnant growth equals stagflation. The term emerged during the 1973-1975 recession.

 

The rising inflation leads to a drop in the currency's purchasing power as we would be able to buy only fewer items for the same money. The situation is far greater when rising inflation is accompanied by a stagnant output. As economic growth halts, unemployment rises but existing incomes do not rise fast enough, making people contend with inflation.

 

One of the causes of stagflation is when a central bank