In economics, stagflation is the situation when both the inflation rate and theunemployment rate are persistently high. It is a difficult economic condition for a country, because when inflation and economic stagnation are occurring simultaneously, a policy dilemma results since actions that are meant to assist with fighting inflation might worsen economic stagnation and vice versa. Theportmanteau stagflation is generally attributed to British politician Iain Macleod, who used the term in a speech to Parliament in 1965.
The concept is notable partly because, in postwar macroeconomic theory, inflation and recession were regarded as mutually exclusive, and also because stagflation has generally proven to be difficult and, in human terms as well as budget deficits, very costly to eradicate once it starts.
In the political arena one measure of Stagflation termed the Misery Index (derived by the simple addition of the inflation rate to the unemployment rate) was used to swing Presidential elections in the United States in 1976 and 1980.
Source: Wikipedia
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