We now have inflation, so, what is Stagflation?
Stagflation is when prices are continuing to increase, while the growth of the economy becomes stagnant. In other words, its bad!!
The federal government has poured so much cash into the economy in many ways, but I will focus on one of them. When you give most people in the country a stimulus check, they will typically go spend it immediately. When everyone goes out and buys stuff at the same time, this stimulates the economy. When the economy is already growing aggressively and you pour stimulus money into it, you get inflation. The same group of people now have more money. They go out and buy stuff they would not have been able to buy before, this causes shortages. When you there are lots of people trying to buy stuff and there is not enough stuff to go around, then those same people will pay more for that product. That my friend is one way to create inflation. If the economy grows because of the stimulus and people get paid more (inflation also inflates peoples income), then no one gets hurt. People have more income, and they spent that extra income on higher prices. At the end of the day, they have exactly the same amount of money they would have had with the lower prices and less income.
However, if the economy slows down, people’s incomes stop increasing, but prices continue going up. This is STAGFLATION!!!