Which economic term is used to describe the phenomenon where inflation remains high while economic growth slows down and unemployment rises?

💡 Solution & Explanation

Stagflation describes an economic condition characterized by stagnant growth, high unemployment, and persistently high inflation simultaneously, defying traditional Keynesian trade-off models. It typically arises from severe supply shocks, such as sudden spikes in global crude oil prices, coupled with contractionary pressures. Policymakers find stagflation exceptionally difficult to combat because standard monetary measures to curb inflation tend to worsen unemployment.