Answer to Question #174795 in History for Vanessa Trejo

Question

What happens to the economy during stagflation?

Answer 1

In economics, stagflation or depression-inflation is where the inflation rate is on the rise, the economic development rate slows, and joblessness remains progressively on the rise. It signifies a tight spot for monetary policy because policies and engagements proposed to lower inflation may worsen the rate of joblessness. It is an unusual condition since inflation is not supposed to happen in a fragile economy. In a stable market economy, dawdling development inhibits inflation. Thus, customer demand drops adequately to keep costs from increasing.