StagflationStagflation is an economic term used to describe a period of economic stagnation and rising inflation. It occurs when economic output is stagnant or declining, but prices are risin... is an economic term used to describe a period of economic stagnation and rising inflation. It occurs when economic output is stagnant or declining, but prices are rising. This is often caused by an increase in the demand for goods and services, but a decrease in the supply of those goods and services. The result is that prices rise and economic activity slows.