About: Stagflation is an economic situation where slow economic growth or stagnation, unemployment or even recession, coexists with high inflation. Normally periods of high economic growth are characterised by price rise. Economic growth drives incomes of corporates and employees which in turn results in more demand for goods and services. This leads to inflation and becomes a reinforcing loop. The reverse plays out during periods of recession, which is usually accompanied by deflation. But stagflation is a situation where incomes shrink and yet prices rise.
Reason: Two main reasons can be supply shock and poor economic policies.
