StagflationBack to Glossary
Stagflation refers to economic conditions in which economic activity slows, while inflation goes up. So, the cost of living rises for all participants of an economy while simultaneously their earning potential is reduced. The term itself is a combination of ‘stagnation’ and ‘inflation’ and was most prevalent during the OPEC oil crisis in the United States in the 1970s. This period was characterized by high unemployment, rising prices and the inability of policymakers to even properly understand the situation, let alone develop strategies to mitigate it.
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