stagflation, in economics, a word coined in the 1970s to describe a combination of a stagnant economy and severe inflation. Previously, these two conditions had not existed at the same time because lowered demand, brought about by a recession (see depression), usually produced lower, or at least stable, prices. Large U.S. government deficits and sharp rises in the costs of energy have been cited as the chief causes of stagflation in the 1970s.
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