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Stagflation

A situation in which rapid inflation is accompanied by stagnating or declining output and employrnent. It is a characteristic of cost-push inflation rather than demand-pull inflation. Cornpanies experience increased costs of raw materials and/or of labour, which reduces their profitability and forces them to raise their own prices and cut investment. The government is then faced with the dilemma that measures to reduce the rate of inflation generated in this way may exacerbate unemployment

Reference: The Penguin Dictionary of Economics, 3rd edt.