What happened to the economy during stagfliation?

Answer 1

During stagflation, the economy experiences stagnant growth, high unemployment, and rising inflation simultaneously. This combination creates a challenging environment for policymakers, as traditional measures to combat inflation, like raising interest rates, can further impede economic growth and worsen unemployment. Stagflation was notably experienced in the 1970s, largely due to oil price shocks and supply chain disruptions. It poses significant challenges as it undermines the typical trade-off between inflation and unemployment.