Stagflation is the combination of stagnant economic growth (often with high unemployment) and high inflation — the worst of both worlds. Standard Keynesian theory predicted inflation and unemployment moved opposite directions (Phillips Curve), but stagflation refuted this. The 1970s US experienced classic stagflation triggered by oil shocks and loose monetary policy. Central banks struggle with stagflation — raising rates cools inflation but worsens unemployment; cutting rates stimulates growth but worsens inflation. The 2022 energy spikes raised stagflation fears but the US largely avoided it. Stagflation typically requires structural shocks (supply disruptions, energy crises) rather than just demand fluctuations.
Article
Bond Market
The bond market is the global market for debt securities — US Treasuries, corporate bonds, municipal bonds, mortgage-backed…
Bubble
An asset bubble is a sustained rise in asset prices well above fundamental value, driven by speculation rather…
Comparative Advantage
Comparative advantage is David Ricardo's foundational economic theory: countries should specialize in producing goods where they have the…
Consumer Price Index
The Consumer Price Index (CPI) is the most widely-cited inflation measure in the US — tracking price changes…
Cost of Capital
Cost of capital is the rate of return investors require to provide capital to a business — combining…
Deflation
Deflation is the sustained decline in general price levels — opposite of inflation. Sounds appealing (things get cheaper!)…
Stagflation
August 22, 2026 · Aditya Gupta
Finance
Related terms
Bond Market
The bond market is the global market for debt securities — US Treasuries, corporate bonds, municipal bonds, mortgage-backed…
Bubble
An asset bubble is a sustained rise in asset prices well above fundamental value, driven by speculation rather…
Comparative Advantage
Comparative advantage is David Ricardo's foundational economic theory: countries should specialize in producing goods where they have the…
Consumer Price Index
The Consumer Price Index (CPI) is the most widely-cited inflation measure in the US — tracking price changes…
Cost of Capital
Cost of capital is the rate of return investors require to provide capital to a business — combining…
Deflation
Deflation is the sustained decline in general price levels — opposite of inflation. Sounds appealing (things get cheaper!)…
