Stagflation, Explained!

OVERVIEW

What is “stagflation”? In this video assignment, students will learn what it looks like when an economy is experiencing “stagflation” and hear about several historical examples of when the US economy experienced stagflation.

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Answer Key

Grade Level

High School

Topics

Inflation

Stagflation, explained! What is stagflation? Typically, high inflation tends to occur alongside a strong economy and low unemployment. When the economy is weak and unemployment is high, inflation is usually low. This relationship is known as the Phillips curve. However, sometimes that is not the case. When there is a combination of relatively high inflation and a very weak economy, economists typically call this stagflation. Precise definitions vary, but here in the US, it's safe to say we experienced two bouts of stagflation during the 1973 to 1975 and 1980 recessions when inflation was above 10%, even as the unemployment rate was high and rapidly rising. With the recent increase in inflation, people have questions about inflation, stagflation, and more. Check out the Cleveland Fed's Center for Inflation Research to better understand inflation and how it affects you and our economy.