Answer to Question #235894 in Economics for Blackbeard

Question

Why is stagflation a problem for any economy

Answer 1

Stagflation is a symbiosis of inflation and stagnation, characterized by stagnation in the economy, rising prices, and a decline in production. The term was coined in the 60s by the politician John MacLeod during his parliamentary speech.

The main signs of stagflation in the economy include Rising unemployment and declining demand for labor. A sharp drop in the exchange rate of the national currency. The uncontrolled rise in prices and depreciation of money. Decline and stagnation in the economy. Decrease in the purchasing power of the population. Reduced investment (when the main indicators go into negative territory). Capital outflow from the country. Typical signs are observed right up to the period of economic stabilization until the state stabilizes the state of affairs in the country.

Then stagflation threatens the population and the national economy of the country: low standard of living; unemployment; falling GDP level; problems in the credit sector; a sharp rise in prices for goods and services; a decrease in the material well-being of citizens. Stagflation is the worst-case scenario of economic development, including inflationary demand and costs.