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Stagnation

Stagnation

Stagnation refers to a prolonged period of slow or no economic growth, typically accompanied by high unemployment and underutilization of resources. During stagnation, demand is weak, businesses invest less, and there is little improvement in living standards. While not as severe as a recession, stagnation can lead to declining productivity, poor wage growth, and overall economic malaise.

Example

Japan experienced economic stagnation in the 1990s and 2000s, with slow growth, low inflation, and high unemployment, despite various efforts to stimulate the economy.

Key points

• A period of slow or no economic growth.

• Often accompanied by high unemployment and underutilized resources.

• Not as severe as a recession but can lead to economic decline.

Quick Answers to Curious Questions

What are the long-term effects of economic stagnation?

Stagnation can result in declining productivity, stagnant wages, and underutilization of labor and capital resources.

How does stagnation differ from a recession?

A recession involves a sharp decline in economic activity, while stagnation is characterized by prolonged slow growth without a clear downturn.

What policies can governments implement to combat stagnation?

Governments may use fiscal stimulus, monetary easing, or structural reforms to boost demand and encourage investment during periods of stagnation.

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