Stagflation
Persistent high inflation combined with high unemployment and stagnant demand in a country's economy.
Stagflation is a particularly challenging economic condition because the usual policy tools for combating inflation (raising interest rates) can worsen unemployment, and tools for combating unemployment (stimulating demand) can worsen inflation.
Commonly confused with
- Recession: A recession is a decline in economic activity. Stagflation includes a recessionary environment (stagnant growth and high unemployment) but adds the critical element of high inflation, which is unusual for a recession.
Collocations
- risk of stagflation
- threat of stagflation
- period of stagflation
Example sentences
- "The 1970s oil crisis led to a period of stagflation in many Western economies, a phenomenon previously thought impossible." Economic history lesson.
- "Analysts are debating whether current supply chain issues could trigger a return to stagflation." Modern economic forecast.
- "Policymakers face a difficult dilemma when trying to address stagflation, as traditional remedies can exacerbate one problem while solving the other." Policy discussion.
Memory hook
STAG-flation means the economy is STAGNANT (not growing) but prices are still INFLATING (going up). Stagnant + Inflation
When not to use
Do not use 'stagflation' for a period of high inflation alone or high unemployment alone. It specifically refers to the simultaneous occurrence of both, along with stagnant economic growth.
Fun facts
- Before the 1970s, many economists believed stagflation was impossible, as they thought inflation and unemployment had an inverse relationship (the Phillips Curve).
Explore more words
stagnant, stagnation, Monetary Policy, Fiscal Policy, Unemployment, stimulus
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