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Stagflation is high inflation and high unemployment.

Keynsian economics holds that stagflation is impossible because high unemployment lowers demand for goods and services which lowers prices. This results in low or no inflation.

A counterexample to this theory was provided by the economy of the United States in the late 1970s, at which time the term was first coined.

See also:

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Last edited September 16, 2001 7:08 am by DanKeshet (diff)