Stagflation is an economic situation
in which inflation and economic stagnation
occur simultaneously
and remain unchecked for a period of time
…Stagflation has generally proven
to be difficult and costly to eradicate once it gets started
Stagflation can result when an economy is slowed
by an unfavorable supply shock
such as an increase in the price of oil
…which tends to raise prices
at the same time that it slows the economy
…Both stagnation and inflation can result
from inappropriate macroeconomic policies
…Central banks can cause inflation
by permitting excessive growth of the money supply
and the government can cause stagnation
by excessive regulation of goods markets and labor markets
…The global stagflation of the 1970s
began with a huge rise in oil prices
but then continued as central banks
used excessively stimulative monetary policy
to counteract the resulting recession
causing a runaway wage-price spiral
Is the federal government stabilizing the economy
by borrowing from relatively younger voters and their children
who may not reap the prosperity of their parents?
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