Are We Headed for a Period of Stagflation?

Stagflation is when a country experiences a stagnant economy and high inflation, typically accompanied by high unemployment. The word “stagflation” can summon unpleasant feelings in anyone who knows what it is or has lived through a period of stagflation. It is one of the most painful economic periods for consumers to live through, and one of the most confusing for central bankers and politicians. Stagflation defies traditional economic theory; stagnant economic growth, high unemployment, and rising prices should theoretically never occur simultaneously. If the economy is doing poorly and more Americans are unemployed, prices should not be rapidly rising. To learn more about how stagflation exists, and why it happens, we need to know the history of stagflation.

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