#Inflation: What is stagflation; & What is to be done? Veronique de Rugy, Senior Research Fellow, Mercatus Center, George Mason University & NRO Online.

May 20, 12:11 AM

Photo:   W-Shape: US 1980–82 recession.   Percent Change in Real GDP (annualized; seasonally adjusted);   Average GDP growth 1947–2009.   Source: BEA


#Inflation: What is stagflation; & What is to be done?  Veronique de Rugy, Senior Research Fellow, Mercatus Center, George Mason University & NRO Online.

https://www.investmentnews.com/el-erian-says-us-cant-avoid-stagflation-even-as-fed-tightens-221716


In economics, stagflation or recession-inflation is a situation in which the inflation rate is high, the economic growth rate slows, and unemployment remains steadily high. It presents a dilemma for economic policy, since actions intended to lower inflation may exacerbate unemployment.  In the version of Keynesian macroeconomic theory that was dominant between the end of World War II and the late 1970s, inflation and recession were regarded as mutually exclusive, the relationship between the two being described by the [now-discredited]  Phillips curve. Stagflation is very costly and difficult to eradicate once it starts, both in social terms and in budget deficits.