Definition Of Stagflation - Economist

- Stagflation or "inflationary recession" can be defined as the existence of an increase in unemployment rates within the economy and at the same time an increase in the rate of inflation, and then there is a positive relationship between them, which causes an economic crisis for the state.  

- We find that this economic problem "stagflation" raised suspicion in Keynesian thought and in Phillips' study, who claim that the relationship between unemployment and inflation is an inverse relationship because the relationship here has become direct.  

- The explanation for this is that the inverse relationship that they have explained is a short-term relationship that occurs for a short and unstable period of time. 

- As for stagflation here, it means that if unexpected inflation occurs, it reduces the real wage of workers, then workers demand to raise their cash wages and as a result, businessmen reduce the labor used, and thus an increase in rates occurs Unemployment.

- If unexpected inflation leads to an increase in unemployment rates and thus enters the country's economy in a closed cycle of recession, and then there is a rise in prices without the ability of fiscal and monetary policies to solve this problem.