Stagflation is an economic condition with persistently high inflation, high unemployment, and relatively stagnant demand for products. Simply put, Stagflation is a situation of stagnant growth and rising inflation.
Typically, high inflation is correlated with lower unemployment rates. However, with Stagflation, both inflation and unemployment are high.
Economists coined the term “stagflation” in the 1970s when the US experienced a combination of economic conditions that experts previously thought was impossible. As a result, the average inflation rate during the decade was 6.85%, far outpacing the 3.41% rate from 1930 to 1980. At its peak in 1979, the inflation rate was 13.3%.
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