Final answer:
Stagflation is a prolonged period of high inflation, high unemployment, and increased public fear. It occurred during recessions and is a phenomenon that traditional Keynesian economics could not explain.
Step-by-step explanation:
A prolonged period of high inflation, high unemployment, and increased public fear is known as stagflation. Stagflation is a phenomenon that occurred in the U.S. economy during the deep recession from 1973 to 1975 and again during back-to-back recessions from 1980 to 1982. Many nations around the world also experienced similar increases in unemployment and inflation. During recessions or depressions, the inflation rate tends to be lower, as seen in historical examples such as the recession of 1920-1921, the Great Depression, the recession of 1980-1982, and the Great Recession in 2008-2009. High levels of unemployment typically accompany recessions, and the total demand for goods falls, pulling the price level down. The rate of inflation often starts moving up when the economy is growing strongly, such as after wartime or during periods of rapid economic growth. However, stagflation, characterized by high unemployment and high inflation, was a phenomenon that traditional Keynesian economics could not explain.