Part Of. Understanding Inflation. Types of Inflation. What Does Inflation Impact? Understanding Hyperinflation. Understanding CPI. Related Terms A-I. Related Terms J-Z.
Economics Macroeconomics. Table of Contents Expand. What Is Stagflation? Understanding Stagflation. Stagflation Theories. Stagflation vs. Special Considerations. What causes stagflation? Why is stagflation bad? What is the cure for stagflation? What is an example of stagflation?
Key Takeaways Stagflation refers to an economy that is experiencing a simultaneous increase in inflation and stagnation of economic output. Stagflation was first recognized during the s when many developed economies experienced rapid inflation and high unemployment as a result of an oil shock. The prevailing economic theory at the time could not easily explain how stagflation could occur.
Since the s, rising price levels during periods of slow or negative economic growth have become somewhat of the norm rather than an exceptional situation. Article Sources. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts.
We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. The outrage it inspired among the American public led him to reverse course and agree to turn over the tapes to Judge Sirica. A new special prosecutor, Leon Jaworski, was appointed and subpoenaed 64 more tapes, including the July 23, , "smoking gun" tape.
Jaworski took the case all the way to the Supreme Court, which voted to uphold the subpoena. With the release of the tapes, the bottom fell out of Nixon's political support.
Senator Barry Goldwater, the conservative leader, told the President that there were a maximum of 18 senators who might vote against his conviction on the articles of impeachment—too few to save him.
The Nixon presidency was over. In his inaugural address, incoming President Gerald R. Ford declared, "Our long national nightmare is over. Grant Rutherford B. Hayes James A. Garfield Chester A. Roosevelt Harry S. Truman Dwight D. Eisenhower John F. Kennedy Lyndon B.
Bush Bill Clinton George W. Help inform the discussion Support the Miller Center. University of Virginia Miller Center. Richard Nixon: Domestic Affairs. Breadcrumb U. Regulation and Social Legislation "Probably more new regulation was imposed on the economy," wrote Herb Stein, the chairman of Nixon's Council of Economic Advisers, "than in any other presidency since the New Deal.
Watergate Watergate was so much more than a single crime and cover-up that it is impossible to summarize the tangle of abuses of presidential power that today are grouped under the name of the hotel where the Democratic National Committee had its offices.
The letter made four points: 1. Nixon announced his resignation on August 8, , to take effect at noon the next day. Richard Nixon Essays Life in Brief. Life Before the Presidency. Campaigns and Elections. Domestic Affairs Current Essay. Foreign Affairs. Life After the Presidency. Family Life. Impact and Legacy. In-Depth Exhibits Scroll left to right to view a selection of exhibits. Stagflation isn't measured by a single data point, but rather by examining the direction of a variety of indicators over an extended period of time.
Rising prices and rising unemployment are two of these data points. The direction of a single one of these indicators does not necessarily indicate the potential for, or the presence of, stagflation. Rather, the phenomena are considered in aggregate. An increase in the cost of food, energy or other individual items is generally not perceived as a sign of stagflation.
However, a broad-based rise in the cost of goods and services can be an indicator. The PPI measures the average change in selling prices received by domestic producers of goods and services over time. From an investment analysis perspective, it is very useful for analyzing potential sales and earnings trends in a variety of industries. From an economic analysis standpoint, movements in the PPI show whether the cost of producing goods is rising or falling.
The CPI measures the weighted average of prices of a basket of consumer goods and services. When tracked over time, the CPI provides insights into the direction consumer prices are headed. The CPI is often referred to as "headline inflation.
When that number rises beyond that, investors begin to fear inflation. Price increases aren't the only rising indicator that suggests the possibility of stagflation. A rising unemployment rate is another indicator. A decline in the gross domestic product GDP and productivity are both indicators of an ailing economy.
GDP tracks the monetary value of all the finished goods and services produced within a country's borders in a specific time period. In a healthy economy, this number is generally rising. Productivity is an economic measure of output per unit of input. Inputs include labor and capital, while the output is typically measured in revenue and other GDP components, including business inventories.
Productivity measures may be examined collectively across the whole economy, or they may be viewed individually by industry to examine trends in labor growth, wage levels, and technological improvement. Declining productivity is generally a sign of an ailing economy. There are multiple theories about why stagflation occurs put forth by Keynesian , monetarist and supply-side economists. Keynesian economists blame supply shocks for causing stagflation.
In , people became concerned about stagflation again. They worried that the Fed's expansive monetary policies , used to rescue the economy from the financial crisis, would cause inflation. At the same time, Congress approved an expansive fiscal policy.
It included the economic stimulus package and record levels of deficit spending. People warned of the risk of stagflation if inflation worsened and the economy didn't improve. This massive increase in global liquidity prevented deflation, a far greater risk. If inflation rose above that target, the Fed would reverse course and institute constrictive monetary policy. First, the Fed no longer practices stop-go monetary policies. Instead, it commits to a consistent direction.
Second, the removal of the dollar from the gold standard was a once-in-a-lifetime event. Third, the wage-price controls that constrained supply wouldn't even be considered today. Corporate Finance Institute. Bureau of Economic Analysis. Princeton University. Accessed July 1, Federal Reserve History. Rik W. Greenwood Publishing Group, Bureau of Labor Statistics.
Department of State, Office of the Historian. Cato Institute. Congressional Research Service. Iowa State University. Federal Reserve Bank of New York. Federal Reserve Bank of St. Council on Foreign Relations. Board of Governors of the Federal Reserve System. Actively scan device characteristics for identification. Use precise geolocation data. Select personalised content. Create a personalised content profile.
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