Problem 29

Introduction

Stagflation occurs when an economy faces both slow growth and rising inflation at the same time. It was first used by Lian Macleod during economic stress in the U.K in the 1960s. It was again used in the 1970s during the recessionary period when oil prices spiked all over the world. It is also termed an inflationary recession giving rise to high unemployment and slow economic growth.