Glossary · Macro · Aggregate demand and supply

Stagflation

Rising prices and falling output at the same time, the signature of a negative supply shock. The 1970s oil crises produced it. It puts policymakers in a bind, because boosting demand fixes output but worsens inflation, and cutting demand does the opposite.

Watch it happen step by stepTaught in: Supply Shocks

Related terms

Cost-push inflationShort-run aggregate supply (SRAS)Short-run Phillips curve (SRPC)

More from aggregate demand and supply

Aggregate demand (AD)Business cycleInflationary gapLong-run aggregate supply (LRAS)Macroeconomic equilibriumOutput gapPotential outputRecessionary gap

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