{"id":5961,"date":"2022-06-06T00:00:00","date_gmt":"2022-06-06T00:00:00","guid":{"rendered":"https:\/\/www.nextias.com\/current_affairs\/uncategorized\/06-06-2022\/stagflation\/"},"modified":"2025-08-07T16:07:52","modified_gmt":"2025-08-07T10:37:52","slug":"stagflation","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/06-06-2022\/stagflation","title":{"rendered":"Stagflation"},"content":{"rendered":"<h2><span style=\"font-size: 13pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong><u>In News<\/u><\/strong><\/span><\/span><\/span><\/h2>\n<ul>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">Recently, the world is facing high inflation including the developed countries like the US which some experts sign as a stage of stagflation.<\/span><\/span><\/span><\/li>\n<\/ul>\n<h2><span style=\"font-size: 13pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong><u>What do you mean by Stagflation?<\/u><\/strong><\/span><\/span><\/span><\/h2>\n<ul>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Stagflation is characterised by slow economic growth and relatively high unemployment<\/strong><\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> or economic stagnation which is at the same time accompanied by<\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong> rising prices (inflation).<\/strong><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">Stagflation can be alternatively defined as a <\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>period of inflation combined with a decline in the gross domestic product (GDP).\u00a0\u00a0<\/strong><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>The idea became popular during the 1970s<\/strong><\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> when the U.S. economy witnessed high price inflation due to the oil shock as well as an economic recession marked by negative economic growth.<\/span><\/span><\/span><\/li>\n<\/ul>\n<div>\n<table style=\"border-collapse: collapse; border: none; width: 591px;\" cellspacing=\"0\">\n<tbody>\n<tr>\n<td style=\"background-color: #fabf8f; vertical-align: top; width: 591px; border: 1px solid #000000;\">\n<h2><span style=\"font-size: 13pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong><u>Inflation vs. Stagflation<\/u><\/strong><\/span><\/span><\/span><\/h2>\n<ul>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Inflation<\/strong><\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> is the rate of increase of the overall price level of goods and services in an economy.\u00a0<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Stagflation<\/strong><\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> describes a combination of high inflation and economic stagnation as reflected by a slow growth rate and high unemployment.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<h2><span style=\"font-size: 13pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong><u>Latest concerns about Stagflation<\/u><\/strong><\/span><\/span><\/span><\/h2>\n<ul>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Outbreak of the COVID-19 pandemic<\/strong><\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> and the curbs imposed to contain the spread of the virus caused the first major recent economic slowdown worldwide.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Ensure optimum conditions<\/strong><\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">: The challenge for policymakers, especially central banks, is to ensure optimum conditions whereby output grows at a healthy pace, helping businesses in the economy to create jobs at a steady pace and thus keeping unemployment low.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>High economic growth invariably spurs faster inflation<\/strong><\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> which is why many central banks have a specific mandate of ensuring that the pace of price gains does not exceed a specified target level or range.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>The most difficult problem for policymakers is when inflation runs high even as economic output either stagnates or, worse, shrinks.<\/strong><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">The slowdown in economic activity, in turn, leads businesses to shed jobs and the resultant situation is termed as \u2018stagflation\u2019.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>The subsequent fiscal and monetary measures<\/strong><\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> taken to address the downturn, including substantial increases in liquidity in most of the advanced economies, fuelled a sharp upsurge in inflation.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Supply shock<\/strong><\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">: While the Fed and the Bank of England are among central banks that have started raising interest rates to cool soaring prices, the ongoing war in Ukraine following Russia\u2019s invasion have caused a fresh and as yet hard-to-quantify \u2018supply shock\u2019.<\/span><\/span><\/span><\/li>\n<\/ul>\n<p><span style=\"font-size: 13pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong><u>Way Forward\/ Suggestions<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>With the prices of commodities ranging from oil and gas to foodgrains, edible oils and fertilisers<\/strong><\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> all surging sharply in the wake of the conflict, authorities face a battle to contain inflation entirely caused by supply factors that are far harder to manage.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>It\u2019s been a series of inflationary shocks<\/strong><\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> that are really different from anything people have seen in 40 years which is not seen regularly.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">The need of the hour is to <\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>find price stability out of this.<\/strong><\/span><\/span><\/span><\/li>\n<\/ul>\n<p><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Source: <\/strong><\/span><\/span><\/span><a style=\"text-decoration: none;\" href=\"https:\/\/www.thehindu.com\/business\/Economy\/explained-how-are-fears-of-stagflation-impacting-markets\/article65493930.ece\" rel=\"nofollow noopener\" target=\"_blank\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #1155cc;\"><strong><u>TH<\/u><\/strong><\/span><\/span><\/span><\/a><\/p>\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In News Recently, the world is facing high inflation including the developed countries like the US which some experts sign as a stage of stagflation. What do you mean by Stagflation? Stagflation is characterised by slow economic growth and relatively high unemployment or economic stagnation which is at the same time accompanied by rising prices [&hellip;]<\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[26,46],"class_list":["post-5961","post","type-post","status-publish","format-standard","hentry","category-current-affairs","tag-gs-3","tag-indian-economy-related-issues"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/5961","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=5961"}],"version-history":[{"count":0,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/5961\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=5961"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=5961"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=5961"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}