Stagflation

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The term stagflation is sometimes used to describe a situation in which there is slow to zero growth in real output (total amount of goods and services produced), high inflation exists, and unemployment is higher than normal. This situation usually begins with rising prices at times when production is declining. Because of declining production, unemployment also increases. All three of these factors combined cause stagflation—stagnation in production and employment together with increasing inflation. It is also because of cost push factors. Because when the cost is rising, prices would go up and because of uncertainity, the investors will hesitate for investment so there will be unemployment.