Stagflation

From Wikipedia, the free encyclopedia
Jump to: navigation, search

In economics, the term stagflation is sometimes used to describe a situation in which there is almost no growth in production (total amount of goods and services produced), there is high inflation, and unemployment is higher than normal. This situation usually begins with things beginning to cost more while fewer of the things are being made. Because fewer things are being made, fewer people are needed to make them. This causes unemployment to increase. All three of these factors together cause stagflation — stagnation in production and employment and increasing inflation. It is also because of "cost push" factors. When it begins to cost more to make an item, the price will increase. People will be less likely to invest money in the company. This will lead to more unemployment.