what is stagnation 
stagnation is a prolonged period of little or no growth in an economy often highlighted by periods of high unemployment a rate of growth of less than 2 3 annually as measured by gross domestic product gdp is considered stagnation stagnation can occur on a macroeconomic scale or in specific industries or companies stagnation may be either a temporary condition such as a growth recession temporary economic shock or part of an economy s long term structural condition understanding stagnationstagnation occurs within an economy when total output is either declining flat or growing slowly persistent unemployment flat job growth no wage increases and an absence of stock market booms or highs are evidence of stagnation as economies cycle through periods of recession to growth or from growth to recession they may experience a time of stagnation stagnation can occur as a temporary condition in the course of an economic cycle or business cycle as a recession is ending and recovery is beginning during these periods both monetary policies and fiscal policies may be implemented to avoid prolonged stagnation specific events or economic shocks can induce periods of stagnation which may be short lived or have lasting effects depending on the specific events and the resilience of the economy war and famine can be external factors that cause stagnation a sudden increase in oil prices or a fall in demand for a key export could also induce a period of stagnation for an economy a stagnant economy can result from longer term structural conditions in a society mature economies are characterized by slower population growth stable economic institutions and slower growth rates classical economists refer to this type of stagnation as a stationary state and keynesian economists consider it common in an advanced economy institutional factors such as entrenched power among incumbent special interest groups who oppose competition and openness can induce economic stagnation western europe experienced this type of economic stagnation during the 1970s and 1980s dubbed eurosclerosis stagnation can afflict underdeveloped or emerging economies where stagnation persists due to the lack of change in political or economic institutions or regions with policies that discourage economic growth overcoming stagnationgovernments commonly implement a monetary policy or fiscal policy that spurs economic growth using tools such as government investment in infrastructure encourages new business projects in construction and materials and increases job creation as wages increase additional money flows into the economy raising demand for goods and services and increasing aggregate economic growth by reducing taxes and regulations businesses or small business owners retain more capital for investment and innovation improving growth in various sectors of the economy 