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Stagflation: CNBC Explains

Monday, 12 Sep 2011 | 6:00 AM ET

While moderate inflation is actually a good thing for a healthy economy, inflation can also occur when the economy is stagnant. When this situation occurs, it is called stagflation. There are many reasons for stagflation, but a classic example is a supply shock, such as an oil shortage. What mechanisms that cause stagflation? Salman Khan of the Khan Academy explains.