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Stagflation is an economic situation in which inflation and economic stagnation occur simultaneously and remain unchecked for a period of time. This is significant because, in postwar macroeconomic theory, inflation and recession were regarded as mutually exclusive, and also because stagflation has generally proven to be difficult and costly to eradicate once it gets started. For example, in 2008, the Federal Reserve made rate cuts to fight the credit crisis, causing commodity prices to soar.
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