Definition of Stagflation

There comes a dilemma situation in economics when the rate of inflation is high, the rate of unemployment becomes high steadily and the growth rate of the economy slows down. Such a dilemma is stagflation. In such a condition if we try to lower inflation then it may in return increases unemployment. It was first recognized in 1970. 


Misery Index which is the total sum of the rate of inflation and the rate of unemployment may emerge due to stagflation.  The solutions to solve such a condition is not easy. The best-known solution for this is to increase productivity which will enable higher growth.

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