One effect of stagflation is high prices on nearly all consumer goods.
Stagflation is a challenging economic condition characterized by slow economic growth and relatively high unemployment (stagnation) which is at the same time accompanied by rising prices (inflation). This combination can lead to a number of adverse effects on an economy.
Consequences of Stagflation
According to the provided reference, the consequences of stagflation include:
- High prices on nearly all consumer goods: Inflation erodes purchasing power, making essential items more expensive for consumers.
- Low wages: Wage growth often fails to keep pace with rising prices, reducing real income.
- Abnormally high unemployment: Economic stagnation leads to job losses and difficulty in finding new employment.
Example of Stagflation
The 1970s in the United States provide a historical example of stagflation, triggered by factors like oil price shocks. Consumers faced rising prices for gasoline and other goods, while unemployment rates increased, and economic growth slowed significantly.
