stagflation
An economic condition characterized by slow growth, high unemployment, and high inflation simultaneously.
Example
“The 1970s oil crisis led to stagflation in the US, with both high inflation and high unemployment.”
Memory Tip
STAG-flation = STAGNATION + INFLATION. The economy is stagnant AND prices are rising.
Why It Matters
Stagflation matters for your personal finances because it creates a uniquely difficult environment where your savings lose purchasing power due to inflation while job opportunities shrink due to slow growth. This means your money buys less while your income becomes less secure, making it harder to plan for the future or protect your wealth.
Common Misconception
Many people assume that inflation and unemployment move together, but stagflation breaks this rule by having both occur at the same time. The common mistake is thinking that when the economy is struggling, prices will naturally fall, when in reality prices can rise sharply even during economic downturns.
In Practice
During the 1970s oil crisis in the United States, stagflation hit hard with inflation reaching 12 percent annually while unemployment climbed above 9 percent. A worker earning 20,000 dollars per year saw their purchasing power shrink by thousands of dollars, while many faced layoffs or wage freezes, creating a painful squeeze on household budgets.
Etymology
Stagnation (no growth) + inflation — the worst of both worlds combined.
Common Misspellings
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See Also
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