BANKING AFFAIRS

Detailed explanation-1: -In economics, stagflation or recession-inflation is a situation in which the inflation rate is high or increasing, the economic growth rate slows, and unemployment remains steadily high.

Detailed explanation-2: -Stagflation is a term that refers to high inflation that happens at the same time as stagnation of growth or outright recession. But sometimes the shocks hitting the economy, rather than coming from changing demand, can come from the supply side: an oil-price shock, say, or a rise in food or other commodity prices.

Detailed explanation-3: -And while a recession is typically predicted to last an average of ten months, stagflation is a terrible phenomenon that could go on for many years, as was experienced in the 1970s. Stagflation is rarer than a recession as inflations occur naturally in our economic cycle.

Detailed explanation-4: -Stagflation is typically defined as an economic cycle where there’s persistently high inflation as well as high unemployment and slow economic growth-compared to a recession where there’s economic decline and generally high unemployment, but inflation is not so much an issue.

Detailed explanation-5: -Inflation decreases during recessions and increases during expansions (recoveries). Another way to illustrate the effects of unemployed resources is with the production possibilities curve (see graph below).